SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1997
Commission File Number 0-15532
MLH INCOME REALTY PARTNERSHIP VI
(Exact name of registrant as specified in governing instrument)
New York 13-3272339
(State of organization) (IRS Employer Identification No.)
World Financial Center, South Tower, 12th Floor
225 Liberty Street, New York, New York 10080-6112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 236-4930
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
Depositary Units Issued Upon
Deposit Of Limited Partnership Interests
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) 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]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant.
Not Applicable
DOCUMENTS INCORPORATED BY REFERENCE
Supplement dated February 13, 1987 to Prospectus dated March 5, 1986 of the
Registrant, filed pursuant to Rule 424(b) is incorporated by reference in Part I
of this Annual Report on Form 10-K.
<PAGE>
PART I.
ITEM 1. BUSINESS.
The registrant, MLH Income Realty Partnership VI (the "Partnership"), is a
limited partnership which was formed on December 4, 1984 under the Uniform
Limited Partnership Act of the State of New York for the purpose of investing
primarily in income-producing commercial, industrial and residential real
estate, either existing or under construction or development. The Partnership
was also permitted to invest in properties by making mortgage loans.
The Partnership's two general partners are MLH Property Managers Inc., a
Delaware corporation (the "Managing General Partner"), and MLH Realprop
Associates VI L.P., a New York limited partnership (the "Associate General
Partner" and, together with the Managing General Partner, the "General
Partners"). The Partnership commenced its offering of up to $500,000,000 of
depositary units (the "Depositary Units") to the public in March 1986 pursuant
to a Prospectus, as supplemented, filed with the Securities and Exchange
Commission in connection with a Registration Statement on Form S-11 (No.
2-98524). The Depositary Units represent the economic rights attributable to
limited partnership interests ("Limited Partnership Interests") in the
Partnership. There are two classes of Depositary Units - Class A Units, which
were sold to individuals and entities which are not exempt from taxation, and
Class B Units, which were sold to tax exempt entities. Following the receipt of
subscriptions for 269,511 Depositary Units at $1,000 per Depositary Unit, the
Partnership suspended its offering of Depositary Units. The Partnership's first
and second closings occurred on June 6, 1986 and August 7, 1986, at which times
204,781 and 64,730 Depositary Units, respectively, were sold. As described in
the Partnership's Supplement dated February 13, 1987 to the Prospectus dated
March 5, 1986 (the "Supplement"), a copy of which is incorporated herein by
reference, in February 1987 the Partnership determined to continue the public
offering and a final closing occurred on May 7, 1987, at which time 4,329
Depositary Units were sold. In addition, 48,430 Units of Limited Partnership
Interest (together with the Depositary Units, the "Units") were sold to a
foreign corporation at four closings held on November 25, 1986, January 20,
1987, March 11, 1987 and April 23, 1987, respectively, pursuant to a private
offering. An additional five Units are held by the initial limited partner, an
affiliate of the Managing General Partner. No other capital contributions will
be made by the Unit holders or any limited partners ("Unit Holders" or "Limited
Partners") that acquired Units at these closings.
The Partnership considers its business to represent one industry segment,
investment in real property.
<PAGE>
<TABLE>
The Partnership made the following real property investments:
<S> <C> <C> <C> <C> <C>
Percentage Date
Name, Type of Property Date of Date of of of
and Location Approximate Size Acquisition Completion Portfolio* Sale
- ----------------------- ---------------- ----------- ------------ --------------- ----------
1801 Century Park East 1.25 acres 3/10/87 N/A 5% 12/19/95
land
Los Angeles, California
Barnett Plaza land 1.99 acres 3/10/87 N/A 2% 3/2/93
Orlando, Florida
American Retirement 4,997 spaces 7/31/87 1970s (except 23% 1991
Communities portfolio one community through
of nine mobile home completed in 1965) 1995 (a)
communities Florida and
California
Five Points Shopping Center 142,200 sq. ft. 9/23/87 1960 (expanded (b) 9/27/95
shopping center and renovated
Santa Barbara, California in 1982)
Bayhill Shopping Center 122,000 sq. ft. 9/23/87 1974 (b) 9/27/95
shopping center
San Bruno, California
Lompoc Shopping Center 163,000 sq. ft. 9/23/87 1960 (renovated (b) 1/24/96
shopping center in 1978 and 1995)
Lompoc, California
Santa Paula Shopping 172,600 sq. ft. 9/23/87 1961 (expanded (b) 1/24/96
Center in 1981 and
shopping center renovated in
Santa Paula, California 1994-1995)
Port Jersey Warehouse/ 1,703,000 sq. ft. 12/30/87 1972-1976 (one 23% 7/6/95
Distribution Center (six buildings); of the and
eight warehouse/ 1/12/88 (seventh buildings 1/30/96 (c)
distribution buildings building); and expanded
Jersey City and 6/20/88 (eighth in
Bayonne, New Jersey building) 1982
Fullerton Business 361,000 sq. ft. 6/16/88 1968 (one 7% 3/6/96
Center South building) and
office/warehouse 1985 (four
buildings Fullerton, buildings)
California
Sunrise Terrace mobile 300 spaces 6/16/89 1973 3% 3/21/95
home community Arroyo
Grande, California
Treasure Island mobile 266 spaces 8/1/89 1937 17% (d)
home community (d) on 27 acres
Laguna Beach, California
</TABLE>
* Represents Partnership's original cash investment in real estate which
consisted of gross proceeds of the offering less offering expenses,
acquisition fees, property purchase costs and reserves. Subsequent capital
expenditures by the Partnership are excluded.
(a) These nine mobile home communities were sold on the following dates: Poway
Royal, January 15, 1991; Heritage Village, June 24, 1994; LaCasa, June 30,
1994; Colony Cove Ellenton, August 2, 1994; LaQuinta Ridge, August 29,
1994; Bermuda Palms, August 29, 1994; Valleydale Estates, August 30, 1994;
Colony Cove New Port Richey, September 30, 1994; and Vista Diablo, November
29, 1995.
(b) These four shopping centers, in the aggregate, represented 20% of the
portfolio.
(c) Seven of these warehouse buildings were sold on July 6, 1995 and the last
one, The Macy's Building, was sold on January 30, 1996.
(d) The land formerly known as Treasure Island, which fee ownership of land and
improvements is held through a joint venture partnership, officially closed
as a mobile home park effective March 15, 1996. See Item 3, Legal
Proceedings, for a discussion of local legislation, administrative
requirements and litigation affecting this property.
<PAGE>
In previous reports filed with the Securities and Exchange Commission, the
Partnership stated that due to adverse conditions in the real estate market, and
the economy in general, it was necessary to extend the holding period for
certain of its properties beyond the originally anticipated six to ten years.
The Partnership's last remaining real estate investment is the land
formerly known as Treasure Island (the "property"), a scenic, oceanfront
property situated on approximately 27 acres, including 4,000 feet of coastline
along the Pacific Ocean, in Laguna Beach, California. Existing zoning permits
use of the property only as a mobile home park; however, the Managing General
Partner believes that changing the use of the property may maximize its value if
appropriate zoning and land use entitlements can be obtained. The property was
officially closed as a mobile park on March 15, 1996 and all former tenants have
vacated the property. Treasure Island Associates ("TIA"), the joint venture
between the Partnership and an unaffiliated entity through which the Partnership
owns an interest in the property, was involved in lawsuits concerning certain
tenants. (see Item 3, Legal Proceedings, for a discussion of local legislation,
administrative requirements and litigation affecting the potential disposition
and value of this property).
On February 10, 1998, TIA announced that it has entered into a non-binding
agreement in principle with The Athens Group, for the sale of the property. The
Athens Group, a Phoenix, Arizona based real estate developer, plans to purchase
the property and to develop it as an oceanfront resort community. TIA owns the
fee interest in the property. Consummation of the sale is subject to several
conditions, including final approval by the City of Laguna Beach of an
acceptable Local Coastal Program/Specific Plan. The Laguna Beach Planning
Commission and the City Council gave preliminary approval of a Local Coastal
Program/Specific Plan for the project in a series of hearings through February
10, 1998. Final approval by the Planning Commission and the City Council is
expected in April or May 1998; approval by the California Coastal Commission is
expected in the fall of 1998. The entitlements for the property which are
actually granted by the Laguna Beach Planning Commission and the City Council
will affect the value and, therefore, pricing of the property. Assuming final
approval by the Planning Commission and the City Council is obtained, the
Partnership currently anticipates that the sale to The Athens Group will be
consummated. The sale to The Athens Group is expected to take place prior to
review of the project by the California Coastal Commission. However, there can
be no assurance that a sale will be consummated. If a sale to The Athens Group
does not take place, the Partnership will assess available alternatives at that
time but expects to continue processing the approvals through the California
Coastal Commission or to sell the property to another buyer.
<PAGE>
The Partnership wishes to insure that statements made regarding expected
future developments regarding the property are accompanied by meaningful
cautionary statements pursuant to the safe harbor established in the Private
Securities Litigation Reform Act of 1995. These forward looking statements are
based upon current available data and reflect the Partnership's expectations
that the Partnership will successfully receive acceptance by the Laguna Beach
Planning Commission and the City Council and that the property will be sold to
The Athens Group. Actual receipt of such approvals and closing of the sale are
subject to future events and uncertainties which could materially affect the
value of the property and ability of the Partnership to receive these approvals
and consummate the sale. Among the factors which could materially affect the
Partnership's prospects for receiving the approvals and closing of the sale are:
(i) uncertainties regarding the granting of approvals by the Laguna Beach
Planning Commission and the City Council (ii) possible delays in the
administrative process required to obtain the approvals which are outside the
control of the Partnership, (iii) objections by third parties to the development
plan proposed by the Partnership for the property, including possible
litigation, which could significantly delay or ultimately prevent the receipt of
the approvals, and (iv) failure of The Athens Group to close for any reason.
There can be no assurance that the approvals will be obtained or that the sale
will be consummated. If the sale to The Athens Group is not consummated and the
Partnership continues processing the approvals through the California Coastal
Commission, there can be no assurance that the approvals will be obtained. If
the sale to The Athens Group is not consummated and the Partnership determines
to sell the property to another buyer, there can be no assurance that such sale
will be consummated.
Neither TIA nor the Partnership is an affiliate of The Athens Group.
Since this is the last remaining property investment of the Partnership,
pursuant to Section 8.1 (ii) of the Partnership's Amended and Restated Agreement
of Limited Partnership, the sale of this last property will cause the
dissolution of the Partnership. The Partnership will not be liquidated, however,
until payment of a final liquidating distribution to the Partnership's partners
of all of the Partnership's remaining assets.
The Partnership did not segregate revenues by geographic region and such a
presentation is not required because it is not necessary to understand the
Partnership's business taken as a whole.
The Partnership has no real estate investments located outside the United
States.
While the Partnership has no employees, pursuant to the Partnership's
Amended and Restated Agreement of Limited Partnership, the Partnership
reimburses affiliates of the Managing General Partner for certain expenses,
including specifically allocated payments for salaried employees rendering
certain services to or for the Partnership. Reference is made to Item 11 below.
Insurance
The current property insurance contract is for a one-year period expiring
March 1, 1999. Under this policy, the buildings and improvements owned by TIA
are covered by an all risk property policy, except for flood risks and
earthquake, with a blanket limit of liability for all perils of approximately
$1,100,000 per occurrence and $2,000,000 in the annual aggregate.
This property insurance is subject to a deductible of $1,000 per
occurrence.
The Partnership has comprehensive general liability insurance for claims or
suits for bodily injury and property damage to third parties on a per occurrence
basis which covers all sums up to the limit of the policy, after which the
Partnership becomes legally obligated to pay.
Also, the Partnership purchased pollution legal liability insurance for
Vista Diablo and each of its commercial properties. The policies provide certain
specified coverage for cleanup costs and/or third party claims for bodily injury
and property damage as a result of covered pollution conditions, up to a limit
of $2,000,000 per property. Each policy has a term of 3 years and is subject to
a $100,000 deductible.
<PAGE>
ITEM 2 PROPERTIES
Reference is made to Item 1 for a description of the Partnerhip's real
property investments, which descripion is incorported herein by reference.
There were two investment properties owned by the Partnership during fiscal
years ended 1996 and 1997: Fullerton Business Center South in Fullerton,
California and the Property (as defined above). Fullerton Business Center, which
was sold during the quarter ended May 31, 1996, had an 85% occupancy level at
the quarter ended February 29, 1996. Subsequent to that quarter, the property
was sold. The land formerly known as Treasure Island located in Laguna Beach,
California, had a 70% occupancy level at the quarter ended February 29, 1996;
however, this property was officially closed effective March 15, 1996.
Set forth below is a brief description of each of the real property
investments made by the Partnership. Reference is made to Notes 1,2,3,4,8 and 9
of the Notes to Consolidated Financial Statements in Item 8 below, the relevant
provisions of which are incorporated herein by reference, for additional
information concerning the property investments.
The Partnership's last remaining real estate investment is the land
formerly know as Treasure Island, a scenic, oceanfront property situated on
approximately 27 acres, including 4,000 feet of coastline along the Pacific
Ocean, in Laguna Beach California. Treasure Island Associates ("TIA"), is the
joint venture between the Partnership and an unaffiliated entity through which
the Partnership owns the fee interest in the property. Existing zoning permits
use of the property only as a mobile home park; however, the Managing General
Partner believes that changing the use of the property may maximize its value if
appropriate zoning and land use entitlements can be obtained (see Item 1,
Business, for a discussion of recent developments, and Item 3, Legal
Proceedings, for a discussion of local legislation, administrative requirements
and litigation, affecting this property). TIA acquired this property on August
1, 1989. A description may be found in the Partnership's Current Report on Form
8-K dated August 15, 1989, a copy of which Report is incorporated herein by
reference.
On December 19, 1995, the Partnership sold the land and the Partnership's
interest as landlord in the ground lease for the land under the property known
as 1801 Century Park East for a sale price of $15,000,000. The sale was made to
the tenant which leased the land from the Partnership under the ground lease,
after the tenant exercised its option to purchase. Upon the distribution of the
proceeds from the sale of this property, the Unit Holders received cash
distributions of Distributable Cash and Sales Proceeds in an amount in excess of
their Capital Contributions, the threshold for the General Partners to receive
2% of all Sale Proceeds previously or then distributed to Partners and any
subsequent distribution of Sale Proceeds (the "General Partner's 2% Interest"),
in accordance with the terms of the Partnership's Amended and Restated Agreement
of Limited Partnership ("Partnership Agreement"). The Partnership's sale of 1801
Century Park East's land is described in the Partnership's Current Report on
Form 8-K dated December 28, 1995, which is incorporated herein by reference.
On March 2, 1993, the Partnership sold the land and the Partnership's
interest as landlord in the ground lease for the land under the property known
as Barnett Plaza. The sale was made to the tenant which leased the land from the
Partnership under the ground lease, after the tenant exercised its option to
purchase. The Partnership's sale of Barnett Plaza's land is described in the
Partnership's Current Report on Form 8-K dated March 15, 1993, which is
incorporated herein by reference.
American Retirement Communities ("ARC") was originally a portfolio of nine
retirement-oriented mobile home communities located in Florida and California
purchased by a joint venture partnership between the Partnership and MLH Income
Realty Partnership V ("MLHIRP V"), a public limited partnership formed by
affiliates of the Managing General Partner. The Partnership had a 66 2/3%
interest in the joint venture. ARC's portfolio was sold from January 15, 1991
through November 29, 1995. The sales are described in the Partnership's Current
Reports on Form 8-K dated November 5, 1990, January 29, 1991, July 1, 1994, July
13, 1994, August 12, 1994, September 1, 1994, September 12, 1994, October 13,
1994, and December 13, 1995, which are incorporated herein by reference.
The Partnership originally made investments in four California shopping
centers (Five Points Shopping Center, Bayhill Shopping Center, Lompoc Shopping
Center and Santa Paula Shopping Center) through a joint venture partnership
known as California Community Center Associates. On May 26, 1989, the
Partnership and an affiliate of the Managing General Partner purchased the
venture partner's interest in California Community Center Associates. On
September 27, 1995, Five Points Shopping Center, situated on 11 acres in Santa
Barbara, and Bayhill Shopping Center, situated on approximately 11 acres in San
Bruno, 12 miles south of San Francisco, were sold. The sales are described in
the Partnership's Current Report on Form 8-K dated October 11, 1995, which
report is incorporated herein by reference.
<PAGE>
On January 24, 1996, Lompoc Shopping Center, located on a 13-acre site in
Lompoc, near Vandenberg Air Force Base, and Santa Paula Shopping Center, located
on a 17-acre site in Santa Paula, approximately 65 miles northwest of Los
Angeles, were sold. The sales are described in the Partnership's Current Report
on Form 8-K dated February 6, 1996, which report is incorporated herein by
reference.
Port Jersey Warehouse/Distribution Center consisted of eight industrial
warehouse distribution buildings in Bayonne and Jersey City, New Jersey. On July
6, 1995, the Partnership sold the seven buildings located in Jersey City, New
Jersey. On January 30, 1996, the Partnership sold The Macy's Building, the
Partnership's last remaining building at the Port Jersey Warehouse/Distribution
Center in Bayonne, New Jersey. The sales are described in the Partnership's
Quarterly Report on Form 10-Q for the Quarterly Period Ended August 31, 1995,
and in the Partnership's Current Report on Form 8-K dated February 6, 1996,
respectively, which reports are incorporated herein by reference.
On March 6, 1996, the Partnership sold Fullerton Business Center South, a
complex consisting of five office/warehouse buildings located in Fullerton,
California, near Los Angeles. The sale is described in the Partnership's Current
Report on Form 8-K dated March 19, 1996, which report is incorporated herein by
reference.
On March 21, 1995, the Partnership sold Sunrise Terrace, a 300-space
retirement-oriented mobile home community located in Arroyo Grande, California.
The sale is described in the Partnership's Current Report on Form 8-K dated
April 3, 1995, which report is incorporated herein by reference.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
TREASURE ISLAND ASSOCIATES LITIGATION
The Partnership owns a joint venture partnership interest in the property
formerly known as Treasure Island (the "Property"), a mobile home community
located in Laguna Beach, California. The Property was purchased by Treasure
Island Associates ("TIA"), a joint venture partnership between the Partnership
and an unaffiliated entity, on August 1, 1989. In October 1991, the City of
Laguna Beach (the "City") enacted an ordinance (the "Ordinance") which requires
mobile home park owners to apply for a conditional use permit ("CUP") prior to a
closure of a mobile home park. On April 30, 1992 in compliance with the
ordinance TIA applied to the City for CUP.
On February 15, 1994, the Laguna Beach City Council adopted a resolution
(the "Resolution") approving the CUP and adopting findings that Treasure Island
was deemed to have closed on may 1, 1992, and that such closure adversely
impacted tenants. The resolution require TIA to mitigate the adverse impact of
the closure on tenants through conditions TIA deemed violative of California
law.
On March 24, 1994, TIA filed a lawsuit in the California Superior Court
for the County of Orange ("the Court") challenging the mitigation conditions
Treasure Island Residents and Owners Association ("TIROA") intervened in this
action. On October 4, 1994, the Court issues a Writ of Mandate directing, among
other things, the City to amend the resolution limiting mitigation measures,
i.e., payment of relocation benefits to tenants whose principal place of
residence on May 1, 1992, was Treasure Island. On December 21, 1994, the court
filed its final decision from which TIROA appealed and TIA cross-appealed.
On November 15, 1994, the City adopted an Amended resolution ("Amended
Resolution") effectively complying with the Court's writ of Mandate although
TIA, again, deemed the mitigation measures legally invalid. Accordingly, on
February 14, 1995, in order to preserve TIA's right to challenge the validity of
the mitigation measures reimposed by the Amended resolution, TIA filed a second
lawsuit with the court. TIROA also intervened in this action.
On May 2, 1995, the City adopted a second amended resolution ("the Second
Amended resolution") reducing substantially the total amount of relocation
benefits potentially payable to residents as a mitigation measure. Accordingly,
on September 1, 1995, TIA executed a settlement agreement with the City which
settled all lawsuits filed by TIA against the City concerning the closure of the
mobile home park. Under the settlement agreement, TIA agreed to (i) deliver a
letter of credit to the City in the amount of $1,270,990 to secure TIA's
obligations under the settlement agreements with residents (described in the
following paragraph), and (ii) pay an additional sum of approximately $1,000,000
tot he City to mitigate the adverse impact to the City's supply of low to
moderate income housing, $500,000 of which was paid in September 1995, with the
balance to be paid at a future date. According to the agreement of the City and
TIA, the letter of credit expired on June 30, 1996, and was not renewed.
Following the adoption of the Second Amended resolution, TIA entered into
settlement agreements for 84 tenant spaces out of a total of approximately 159
remaining tenant spaces under which the settling tenants released TIA from all
claims in consideration of cash payments and/or up to one year free rent. These
agreements required the payment of a total of approximately $2,400,000 which has
been paid. All but one of the tenants who signed a settlement agreement at that
time have vacated the property. The one remaining settling tenant, who is an
employee of the managing agent, will vacate when his employment terminates.
Of the remaining tenants who did not enter into a settlement agreement with
TIA in 1995 following adoption of the Second Amended Resolution, 62 began or had
been, withholding rent and refusing to vacate the property, claiming they were
owed relocation benefits under the Amended resolution and that the Second
Amended Resolution was invalid. On or about April 1995, TIA initiated unlawful
detainer actions (the "non-payment unlawful detainers") against these tenants in
the South Orange County Municipal Court to obtain possession of its property,
back rent, and damages.
On May 26, 1995, TIROA filed a lawsuit with the court alleging that the
City Council's attempt to reduce relocation benefits in the Second Amended
Resolution was illegal and therefore invalid. Alternatively, TIROA challenged
the validity of the Second Amended resolution on environmental and other
grounds. In addition, on June 16, 1995, 73 tenants and former tenants, some of
whom had been named in the non-payment unlawful detainers, filed with the Court
a lawsuit alleging TIA had breached the implied covenant of good faith and fair
dealing, unlawfully discriminated, breached the covenant of quiet enjoyment
and/or constructive eviction, violated antitrust laws, and committed unlawful,
unfair and fraudulent business practices, and for declaratory relief. The
complaint sought damages and injunctive relief for alleged wrongful conduct in a
series of actions relating to park closure and eviction through the non-payment
unlawful detainers. These same tenants or former tenants also, on June 16, 1995,
filed an action in the United States District Court for the Central District of
California (the "Federal Action") alleging violations of the antitrust
provisions of the Sherman and Clayton Acts seeking damages in the estimated
amount of $15,000,000 and injunctive relief. The allegations contained in the
Federal Action mirrored in the action filed with the Court on the same day.
On September 1, 1995, TIA, pursuant to the Second Amended Resolution and
California law, gave written notice that all tenancies in Treasure Island,
exclusive of those tenants who had signed a settlement agreement in 1995, would
terminate based upon TIA's CUP closing the park and payment of relocation
benefits and that Treasure Island would actually close March 15, 1996.
In accordance with the Second Amended Resolution, TIA, on February 6, 1996,
mailed to all tenants who had not entered into a settlement agreement in 1995,
and has TIA determined qualified for relocation benefits, checks in an amount
not to exceed $20,000 per tenant.
On the date Treasure Island actually closed, March 15, 1996, all tenants
who had not signed settlement agreements in 1995 refused to vacate the property
pursuant to the September 1, 1995, written notice given by TIA. TIA in or about
mid and late March 1996, initiated unlawful detainer actions against these
remaining tenants based upon park closure (the "closure unlawful detainers".)
On march 26, 1996, Mr. K.P. Rice and 100 other tenants, and former tenants,
including virtually all tenants who were defendants in the non-payment unlawful
detainers, and closure unlawful detainers, as well as Plaintiffs in the action
filed with the Court on June 16, 1995, filed another action against TIA with the
court alleging claims for declaratory relief, damages, damages for statutory
violations, and unlawful, unfair or fraudulent business practices.
Following a series of pretrial procedures TIROA's lawsuit challenging the
Second Amended Resolution and the tenants' actions filed with the Court were
consolidated and transferred to the Court's Complex Litigation Panel. In
addition, the non-payment unlawful detainers and closure unlawful detainers were
consolidated and likewise transferred to the Court's Complex Litigation Panel.
The court rejected TIROA's challenge to the Second Amended Resolution and
upheld the Second Amended Resolution entering judgement against TIROA and in
favor of TIA. In addition, the Court bifurcated the issue of possession and
entered a judgement of possession in favor of TIA against all tenants in the
consolidated unlawful detainer actions. Both TIROA and the tenants appealed the
adverse judgements.
Following entry of judgement against TIROA and the tenants, and the ensuing
appeals, TIA, the tenants and TIROA entered into settlement discussions that
culminated in settlement agreements to settle all litigation among them. Under
the terms of the settlement agreements, the tenants and TIROA have released all
claims against TIA and the tenants are obligated to pay TIA a total sum of
approximately $807,000 as well as dismiss all actions. The tenants have also
dismissed their appeal of the judgement of possession. TIA under the terms of
its settlement agreements with various tenants. The settlement agreement with
TIROA has been fully executed and performed and all TIROA refused to sign a
settlement agreement, or have not fully performed their settlement agreement, or
are attempting to renegotiate their settlement. TIA to date has collected
approximately $538,000 in settlement funds from the tenants. TIA anticipates
that the eleven unsigned or unperformed settlement agreements will either be
signed, fully performed, or a judgement entered for money damages against the
tenants pursuant to the settlement by May 15, 1998.
The Federal Action was on TIA's motion dismissed and judgement entered in
favor of TIA. On appeal, the United States Court of Appeals for the Ninth
Circuit affirmed the dismissal."
TIA intends to capitalize the cost of all of the above settlements as part
of its investment in the property related to any redevelopment efforts.
On June 10, 1996, another action was filed against TIA by one individual,
David B. Mautner. Mr. Mautner claims to have been improperly denied relocation
benefits allegedly owed to him under the resolutions. In a statement of damages,
he seeks special damages of $40,000, general damages of $100,000 and punitive
damages of $200,000. This case has been dismissed with prejudice.
On May 2, 1996, Mr. George Posey, a nonresident tenant, filed an action in
Orange County Superior Court against TIA for Trespass, Constructive Eviction,
Breach of Covenant of Quiet Enjoyment, Declaratory Relief, and Unfair Business
Practices. TIA successfully demurred to the complaint and a first amended
complaint was filed July 19, 1996, seeking to Set Aside Warehouseman's Lien
Sale, Cancellation of Instrument, Declaratory Relief, Malicious Prosecution,
Constructive Eviction, Breach of Covenant of Quiet Enjoyment, Trespass, and
Unfair Business Practices. Mr. Posey claims that TIA wrongfully sold his
mobilehome at a warehouseman's lien sale and thereafter denied him entry to the
mobilehome. In a statement of damages he seeks special damages of $50,000,
general damages of $250,000, and punitive damages of $500,000. This case is
pending as a related case with the damages cases filed by the other tenants. TIA
is conducting discovery on this claim. No trial date has been set.
In February of 1996, the Partnership submitted a development proposal to
the City of Laguna Beach for the redevelopment of the Property. The initial
application included a combination of detached single-family residences,
multi-family housing and a resort hotel complex including meeting rooms and
restaurants. The application consisted of a local coastal program ("LCP") and a
specific plan reflecting such uses. An LCP is required by California law because
the City has not obtained approval from the California Coastal Commission for a
Local Coastal Program for the Property as required by the California Coastal
Act.
After receiving input on the development proposal from community groups,
City Planning Staff and Planning Commissioners, the application was suspended on
July 30, 1996 and a revised application was submitted in March 1997. The revised
development proposal has been reduced in scale and describes a project
consisting of a resort center with up to 250 guest rooms and associated
conference, restaurant and parking facilities, 47 single-family lots and
approximately 11.6 acres of public open space. A draft Environmental Impact
Report required by the California Environmental Quality Act was prepared to
examine the environmental impacts of the project and was released to the public
on August 25, 1997. California law requires a 45-day public review period before
the development proposal may be approved by the City Planning Commission.
<PAGE>
On February 10, 1998, TIA announced that it has entered into a non-binding
agreement in principle with The Athens Group, for the sale of the property. The
Athens Group, a Phoenix, Arizona based real estate developer, plans to purchase
the property and to develop it as an oceanfront resort community. TIA owns the
fee interest in the property. Consummation of the sale is subject to several
conditions, including final approval by the City of Laguna Beach of an
acceptable Local Coastal Program/Specific Plan. The Laguna Beach Planning
Commission and the City Council gave preliminary approval of a Local Coastal
Program/Specific Plan for the project in a series of hearings through February
10, 1998. Final approval by the Planning Commission and the City Council is
expected in April or May 1998; approval by the California Coastal Commission is
expected in the fall of 1998. The entitlements for the property which are
actually granted by the Laguna Beach Planning Commission and the City Council
will affect the value and, therefore, pricing of the property. Assuming final
approval by the Planning Commission and the City Council is obtained, the
Partnership currently anticipates that the sale to The Athens Group will be
consummated. The sale to The Athens Group is expected to take place prior to
review of the project by the California Coastal Commission. However, there can
be no assurance that a sale will be consummated. If a sale to The Athens Group
does not take place, the Partnership will assess available alternatives at that
time but expects to continue processing the approvals through the California
Coastal Commission or to sell the property to another buyer.
PARTNERSHIP LITIGATION
On November 29, 1995, December 15, 1995, December 22, 1995, and February 6,
1996, certain putative class actions were filed purportedly on behalf of, among
others, all persons who purchased limited partnership interests in the
Partnership. Pursuant to an order of the United States District Court for the
Southern District of New York dated February 25, 1996, these actions have been
consolidated in that Court for pre-trial purposes under the caption In re
Merrill Lynch Limited Partnerships Litigation (the "New York Consolidated
Action"). Pursuant to that order, on March 29, 1996, the plaintiffs filed a
First Consolidated Amended Class Action Complaint (the "Amended Complaint"),
which superseded the allegations in the complaints mentioned above. In addition
to investors of the Partnership, the Amended Complaint was filed purportedly on
behalf of all persons who purchased limited partnership interests in certain
other limited partnerships formed by affiliates of the Managing General Partner
and for which the Managing General Partner has acted or acts as a general
partner, and certain other limited partnerships for whom Merrill Lynch, Pierce
Fenner & Smith Incorporated ("MLPF&S") acted as selling agent (all such
partnerships other than the Partnership are hereinafter referred to as the
"Other Partnerships"), against MLH Property Managers Inc. and MLH Realprop
Associates VI L.P. (the "General Partners"), certain affiliates of the General
Partners, Merrill Lynch & Co., Inc. ("ML & Co."), MLPF&S, Merrill Lynch, Hubbard
Inc. ("MLH"), and certain direct or indirect subsidiaries and/or affiliates of
ML & Co., as defendants (collectively, the "Defendants 1"). The Partnership and
certain of the Other Partnerships were originally named as defendants in certain
of the actions, but those partnerships were not named in the Amended Complaint.
Plaintiffs' complaint alleges that the Defendants 1 (i) violated the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), (ii) engaged in fraud and
negligent misrepresentation in connection with the sale of limited partnership
interests in the Partnership and the Other Partnerships, (iii) breached their
fiduciary duties, and (iv) breached their contracts or tortiously interfered
with express or implied contracts and covenants. The action seeks compensatory,
consequential, treble, general and punitive damages, disgorgement and
restitution, the costs and expenses incurred in connection with the action,
reasonable attorneys' fees, and such other and further relief as the Court may
deem just and proper. On July 17, 1996, the court endorsed a stipulation and
order which provides for (a) the dismissal without prejudice of claims relating
to certain of the Other Partnerships; (b) the certification of a plaintiff class
as to certain of the claims alleged in the Amended Complaint; and (c) the filing
of a supplemental pleading in the action adding claims under the New Jersey
Securities Fraud statute and the New Jersey Criminal Justice Act of 1970. On
September 27, 1996, the Partnership and other defendants moved to dismiss the
Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and
9(b), on the grounds, among others, that the claims contained in the Amended
Complaint were barred by the statute of limitations. At a hearing held on
October 15, 1996, the Court granted plaintiffs until January 17, 1997 to file a
second consolidated amended class action complaint ("Second Amended Complaint")
and held that Defendants 1's motion would be deemed withdrawn. Plaintiffs filed
their Second Amended Complaint on January 17, 1997. Defendants 1 moved to
dismiss the Second Amended Complaint on February 17, 1997. On August 26, 1997,
the Honorable Michael B. Mukasey, United States District Judge in the Southern
District of New York, issued a 51-page Opinion and Order granting the
Defendants' motion to dismiss the Consolidated Action. Finding that plaintiffs'
RICO claims were barred by the applicable statutes of limitations, the District
Court dismissed plaintiffs' RICO claims with prejudice and dismissed the
remaining state law claims for lack of subject matter jurisdiction. The District
Court declined to grant plaintiffs leave to replead. On September 24, 1997,
plaintiffs filed a notice of appeal with Second Circuit Court of Appeals.
Plaintiffs' appeal has now been fully briefed and the parties are awaiting a
decision by the Second Circuit. Defendants 1 intend to contest Plaintiffs'
claims vigorously. The Partnership may be obligated to indemnify certain of the
Defendants 1 for loss, liability, claim, damage and expense subject to the terms
and conditions of the indemnity provisions of the Agency Agreement dated March
5, 1986 among the Partnership, its General Partners and MLPF&S. The ultimate
outcome of this action is not determinable at this time.
<PAGE>
On January 22, 1996, a putative class action was filed in the Superior
Court of New Jersey, Essex County, purportedly on behalf of all persons who
purchased limited partnership interests in the Partnership and other limited
partnerships formed by affiliates of the Managing General Partner and for which
the Managing General Partner has acted or acts as a general partner. As amended,
the complaint names MLH, MLPF&S, ML & Co., Merrill Lynch Realty, Inc., certain
past and present employees of MLH, the Partnership and certain other limited
partnerships for which MLPF&S acted as selling agent (collectively, the
"Defendants 2") as defendants. The complaint alleges (i) common law fraud and
deceit; (ii) equitable fraud; (iii) negligent misrepresentation; (iv) breach of
fiduciary duty; (v) breach of implied covenant of good faith and fair dealing;
(vi) violation of the New Jersey Securities Fraud statute; and (vii) violation
of the New Jersey Criminal Justice Act of 1970; allegedly as a result of
material misrepresentations and omissions of fact in connection with the sale of
limited partnership interests in the Partnership and such other limited
partnerships, the subsequent concealment of the fraud alleged, and the alleged
conduct of the Defendants 2 in the management and operation of the Partnership
and such other limited partnerships. The action seeks (i) unspecified damages
including compensatory, general, consequential, treble, incidental, punitive,
and exemplary damages (ii) disgorgement and restitution of earnings, profits,
compensation and benefits received by Defendants 2, (iii) interest (iv) costs
including attorneys', accountants' and experts' fees and (v) such other relief
as the Court deems just and proper. Defendants 2 believe that they possess
meritorious defenses to the claims in this action, and intend to contest such
claims vigorously. On or about March 25, 1996, Defendants 2 moved to dismiss or
stay this action in favor of the New York Consolidated Action, and on June
24,1996, the Court ordered the action stayed until August 9, 1996. On August 9,
1996, the Court orally ruled that the action would be dismissed without
prejudice in favor of the New York Consolidated Action. The Court signed a
written order of dismissal on August 26, 1996. The Partnership may be obligated
to indemnify certain of the Defendants 2 for loss, liability, claim, damage and
expense subject to the terms and conditions of the indemnity provisions of the
Agency Agreement dated March 5, 1986 among the Partnership, its General Partners
and MLPF&S. The outcome of this action is not determinable at this time.
On or about February 6, 1996, a putative class action was filed in the
Circuit Court for Baltimore City, Maryland and on February 13, 1996, an amended
complaint was filed, purportedly on behalf of all persons who purchased
unspecified limited partnership interests, which may include interests in the
Partnership, against ML & Co., MLPF&S, and a limited partnership for which
MLPF&S acted as selling agent, as defendants (collectively, the "Defendants
3").The amended complaint alleges that the Defendants 3 (i) made material
misrepresentations and omitted material information in the offering of interests
in the specified limited partnership and other unspecified limited partnerships;
(ii) breached their fiduciary duties; (iii) were unjustly enriched; and (iv)
converted the personal property of the plaintiff and other putative class
members. The action seeks (i) unspecified compensatory and punitive damages;
(ii) equitable and injunctive relief, including disgorgement of gain, a
constructive trust on all fees, discounts and commissions, impounding or
attachment of ill-gotten moneys, freezing of assets, and restitution; (iii)
reasonable attorneys' fees, costs and expenses incurred in connection with the
action; (iv) pre- and post-judgment interest; and (v) such other and further
relief as the court may deem necessary or appropriate. Defendants 3 believe that
they possess meritorious defenses to the claims in the action, and intend to
contest such claims vigorously. The Partnership may be obligated to indemnify
certain of the Defendants 3 for loss, liability, claim, damage and expense
subject to the terms and conditions of the indemnity provisions of the Agency
Agreement dated March 5, 1986 among the Partnership, its General Partners and
MLPF&S. By stipulation the parties to the action have agreed to stay this matter
pending further proceedings in the New York Consolidated Action. The outcome of
this action is not determinable at this time.
On May 9, 1996, a putative class action was filed in the Supreme Court of
the State of New York, County of New York, purportedly on behalf of all persons
who purchased limited partnership interests in the Partnership and certain other
limited partnerships formed by affiliates of the Managing General Partner,
against ML & Co., MLPF&S, the General Partners, and certain affiliates of MLH,
as defendants (collectively, the "Defendants 4"). The complaint alleges (i)
fraud; (ii) negligent misrepresentation; (iii) breach of fiduciary duty; (iv)
breach of third party beneficiary contract; and (v) breach of implied covenant.
The action seeks (i) an order certifying the proposed Class; (ii) compensatory
damages; (iii) consequential damages; (iv) general damages; (v) punitive
damages; (vi) disgorgement and restitution; (vii) costs and disbursements;
(viii) reasonable attorneys' fees; and (ix) such other and further relief as the
Court may deem just and proper. On May 29, 1996, the parties entered into a
stipulation to dismiss the action without prejudice, based on the existence of
the New York Consolidated Action. Based on that stipulation, Defendants 4 moved
for an order dismissing the action without prejudice. On or about July 9, 1996,
the Court entered an order dismissing the action without prejudice.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of Unit Holders during the fourth quarter
of the fiscal year.
<PAGE>
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
An established public trading market for the Units does not exist, and it
is not anticipated that such a market will develop in the future. Accordingly,
accurate information as to the market value of a Unit at any given date is not
available.
Effective November 9, 1992, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch" or "MLPF&S") introduced a new limited partnership
secondary service through Merrill Lynch's Limited Partnership Secondary
Transaction Department ("LPSTD"). This service assists Merrill Lynch clients
wishing to buy or sell limited partnership interests.
The following table sets forth the range of prices for which Partnership
Units were bought or sold through the LPSTD for each quarterly period within the
two most recent fiscal years:
For the Quarter Ended Range
--------------------- -----------
02/29/96 $235 - $300
05/31/96 $195 - $216
08/31/96 $ 81 - $150
12/31/96 * $ 90 - $106
03/31/97 $ 83 - $ 96
06/30/97 $ 88 - $ 96
09/30/97 $ 87 - $ 92
12/31/97 $ 96 - $ 98
* This includes a stub period of 12/1/96 through 12/31/96, during which the
Partnership changed its fiscal year end from 11/30 to 12/31. There were no
trades during this period.
The Partnership's last remaining real estate investment, the land formerly
known as Treasure Island, does not currently generate cash flow. It is therefore
expected that Unit holders will not receive further distributions until this
last property is sold.
The Limited Partners' Capital per Unit for financial reporting purposes was
$124.23 at December 31, 1997, which approximated the Partnership's net asset
value per Unit as of the same date. The net asset value was based upon the
estimated future value of the Property, together with other assets less
liabilities and less the General Partners' 2% residual carried interest in
future sale proceeds. Cumulative cash distributions from all sources totaled
$1,121.58 per Unit for Limited Partners admitted June 6, 1986 (consisting of
$656.80 per Unit of sales proceeds and $464.78 per Unit of Distributable Cash).
The net asset value per Unit at December 31, 1997, plus cumulative cash
distributions paid to Limited Partners admitted on June 6, 1986, totaled
approximately $1,246 per Unit.
The estimated future value of the property formerly known as Treasure
Island represents the opinion of the Managing General Partner and is based on
facts and conditions existing on the date of the estimation and on a number of
assumptions concerning future circumstances, which assumptions may or may not
prove to be accurate. In addition, the property's value may fluctuate in
response to many real estate market and economic conditions. Therefore, the
current net asset value of the Partnership may be different from the
Partnership's net asset value as of December 31, 1997 because the property, if
it were sold, might be sold for a higher or lower price than the value reflected
in the December 31, 1997 net asset value. In addition, the net asset value per
Unit may not represent the Unit's current market value, and investors may or may
not be able to realize the net asset value per Unit upon disposition of their
Units.
<PAGE>
Beginning with December 1994 client account statements, MLPF&S implemented
new guidelines for valuing limited partnerships and other direct investments
reported on client account statements. As a result, MLPF&S no longer reports
general partner estimates of limited partnership net asset value on its client
account statements, although the Partnership's Managing General Partner may
continue to provide its estimate of net asset value in reports to Unit Holders.
Pursuant to the limited partnership valuation guidelines implemented in December
1994, estimated values for limited partnership interests originally sold by
MLPF&S (such as the MLH Partnerships) are provided to MLPF&S by independent
valuation services. Commencing in 1996, such estimated values are provided two
times per year. The estimated values will be based on financial and other
information available to the independent services on the prior August 15th for
reporting on December year-end client account statements, and on information
available to the services on the prior March 31st for reporting on June
month-end MLPF&S client account statements. The Managing General Partner's
estimate of its fiscal year end net asset value as set forth above was based on
the estimated future value of the property, together with other assets less
liabilities and less the General Partners' 2% residual carried interest in
future sale proceeds. The value provided by the independent services, however,
reflects the estimated value of the Partnership Units themselves based on
information that was available on August 15th. MLPF&S clients may contact their
Merrill Lynch Financial Consultants or telephone the number provided to them on
their account statements to obtain a general description of the methodology used
by the independent valuation services to determine their estimates of value.
Like the Partnership's net asset value, the estimated values provided by the
independent services are not market values and Unit Holders may not be able to
sell their Units or realize the amounts shown on their MLPF&S statements upon a
sale. In addition, Unit Holders may not realize the amount shown on their
account statements upon the liquidation of the Partnership over its remaining
life.
The Units are evidenced by depositary receipts and may be transferred by
the Unit Holders. Because of the adverse tax consequences which would have,
through the 1997 fiscal year end, resulted from transfers of Class A Units to
tax exempt entities, generally, transfers of Class A Units to tax exempt
entities were not recognized by the Partnership except for transfers upon death
and by operation of law and transfers by gift to religious, charitable,
educational or similar organizations and trusts. The Managing General Partner,
in its discretion, may permit the sale of Class B Units to some taxable
investors and to a foreign corporation organized to purchase Units with the
proceeds of a foreign offering. No transfer or assignment of any Unit shall be
made if it would result in a change in the Partnership's tax status. A transfer
will not be registered if, immediately thereafter, any transferor or transferee
would hold less than five Units (two Units for an Individual Retirement Account
or Keogh Plan) or if any transferor or transferee would hold a fraction of a
Unit (except for a transfer by gift, inheritance or family dissolution or a
transfer within a family or to an affiliate of the transferor).
The approximate number of record holders of Units at December 31, 1997 was
39,082. The Partnership's CUSIP number is 55307D204 for Class A Units and
55307D303 for Class B Units.
Distributable Cash, if any, is to be paid 90.16% to the Unit Holders and
9.84% to the General Partners. Unit Holders will receive cash distributions only
if net cash flow from operations (or reserves) is available for distribution.
The levels of operating cash distributions are dependent upon the yields
generated by the Partnership's real property investments, after taking into
account reserve requirements, capital expenditures, working capital
requirements, and investments in short-term instruments. As a result, cash
distribution levels may fluctuate from time to time. Also, as a result of
property sales, the amounts of cash from operations available for distribution,
if any, have declined. The Partnership's last remaining real estate investment,
the land formerly known as Treasure Island located in Laguna Beach, California,
does not currently generate cash flow. Considering reserve requirements, the
costs associated with the redevelopment and eventual sale of this property, the
Partnership does not expect to make future cash distributions to Limited
Partners until the sale of this last remaining property.
Total cumulative distributions paid or accrued from all sources since
inception of the Partnership to Unit Holders admitted on June 6, 1986 equals
$1,121.58 per Unit. Reference is made to Item 6, Selected Financial Data, for
total cumulative distributions made to Unit Holders admitted at subsequent
closings.
A distribution of $123.41 per Unit, representing net proceeds and related
interest from the sales during the first half of the 1996 fiscal year of Santa
Paula Shopping Center, Lompoc Shopping Center, The Macy's Building, Fullerton
Business Center South and the land under 1801 Century Park East, was paid to
Unit Holders on August 30, 1996. The Partnership did not make any cash
distributions for the fiscal year 1997.
<PAGE>
Reference is made to Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, for further information relating
to the Partnership's cash distributions, which information is incorporated
herein by reference.
Sale or Financing Proceeds will be distributed, generally, first to the
Unit Holders until they have received distributions of Distributable Cash and
Sale or Financing Proceeds in an amount equal to their capital contributions
(which event occurred with the distribution of the net proceeds from the sale of
the land under 1801 Century Park East), second to the General Partners in an
amount such that the General Partners received 2% of the Sale or Financing
Proceeds previously or then being distributed to Partners, and third to Unit
Holders until they receive a return of their capital plus cumulative cash
distributions and Sale or Financing Proceeds equal to 6% per annum of their
adjusted capital contributions. Thereafter, once the General Partners receive an
amount not in excess of 2% of the sale proceeds (including any loan principal
repayments) received, any remaining Sale or Financing Proceeds will be
distributed 85% to the Unit Holders and 15% to the General Partners. In no event
will the General Partners receive any such Sale or Financing Proceeds (except
for their 2% interest in sale proceeds) unless the Unit Holders have received a
return of their capital contributions plus cumulative distributions of
Distributable Cash and Sale or Financing Proceeds equal to 9% per annum of their
adjusted capital contributions. Sale or Financing Proceeds, as defined in the
Partnership Agreement, excludes, at the discretion of the Managing General
Partner, amounts allocated to various purposes including improvements. Sale or
Financing Proceeds will be distributed on or before the last day of the third
month after the end of the fiscal six-month period in which such proceeds were
received by the Partnership.
Taxable income arising from current operations generally will be allocated
in the same proportions as distributions of Distributable Cash (or, if there is
no Distributable Cash, 99% to the Unit Holders and 1% to the General Partners).
Taxable income arising from a sale or financing will generally be allocated
first, 1% of the taxable income to the General Partners; second, to each Unit
Holder and each General Partner in an amount equal to any negative amount of his
capital account; and third, first to the General Partners in an amount equal to
the lesser of (a) the amount of Sale or Financing Proceeds distributed to them
in connection with the sale or financing or (b) an amount sufficient to increase
the aggregate positive amount of their capital accounts to the amount referred
to in (a) above, second, to the Class A Unit Holders so as to equalize the
average capital account balances of the Class A and Class B Unit Holders, and
third, the balance to the Unit Holders. Any tax loss will be allocated 99% to
the Unit Holders and 1% to the General Partners. In no event will the General
Partners be allocated less than 1% of taxable income arising from any source.
Through September 30, 1993, depreciation deductions allocable to Unit Holders
were allocated solely to Class A Unit Holders. In 1995, any differences
resulting from prior special allocations of depreciation deductions have been
eliminated between the per Unit Capital Account balances of the Class A and
Class B Unit Holders.
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA.
The following sets forth a summary of the selected financial data for the
Partnership:
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURES
FOR THE YEARS ENDED DECEMBER 31, 1997,
NOVEMBER 30, 1996, 1995, 1994 AND 1993
(Dollars in Thousands, Except Per Unit Data)
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
------------- ------------- ------------- -------------- -------------
Total Operating Revenues...................... $ 1,145 $ 5,458 $21,605 $ 51,599 $ 34,910
Net income (loss) (a)......................... (726) 1,681 (8,383) 22,888 14,667
Net income (loss) allocated to
Limited Partners (a)....................... (726) (2,639) (9,677) 20,227 13,224
Total assets - end of year (b)................ 40,916 41,745 175,664 269,976 286,746
Cumulative Limited Partners'
distributions paid or payable - end of year... 359,281 359,281 319,509 215,765 139,492
Limited Partners' capital
- end of year (c)........................ 40,035 40,798 83,209 196,630 252,676
Per Unit Data (d):
Net income (loss) (a).................... (2.25) (8.19) (30.03) 62.76 41.03
Distributions paid or payable (c)........ -- 123.41 321.91 236.67 66.91
Limited Partners' capital
- end of year......................... 124.23 126.59 258.19 610.13 784.04
</TABLE>
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing in Item 8 of this Annual
Report.
(a) Net income for 1996 includes gains on the sales of three real estate
investments of $1,369,000, (none of which is allocated to the Limited
Partners) and a loss on the sale of one real estate investment of $430,000
(100%, or $1.33 per Unit, allocated to the Limited Partners).
Net loss for 1995 includes gains on the sales of three real estate
investments of $2,769,000, ($2,387,000, or $7.41 per unit, allocated to the
Limited Partners) and losses on the sale of two real estate investments of
$1,820,000 (100%, or $5.65 per Unit, allocated to the Limited Partners).
Net income for 1995 also includes a writedown for impairment of assets of
$18,600,000 (100%, or $57.71 per Unit, allocated to the Limited Partners).
Net income for 1994 includes gains on the sales of seven real estate
investments of $18,344,000, ($17,164,000, or $53.26 per unit, allocated to
the Limited Partners). Net income for 1994 also includes a writedown for
impairment of assets of $10,500,000 (100%, or $32.58 per Unit, allocated to
the Limited Partners).
Net income for 1993 includes a gain from the sale of Barnett Plaza of
$226,000 ($204,000, or $.63 per Unit, allocated to the Limited Partners).
(b) Total assets are net of accumulated depreciation and are net of a
$13,941,000 writedown for impairment of assets. Total assets are net of
additional writedowns for impairment of assets of $18,600,000 and
$10,500,000 in 1995 and 1994, respectively.
(c) Cumulative Limited Partners' distributions paid through December 31, 1997
have been allocated to the Limited Partners based upon the dates they
became Unit Holders and are summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Percentage
Return of
Cumulative Original
Date Became Cumulative Distributions Capital
Unit Holder Units Distributions Per Unit Contribution
- -----------------------------------------------------------------------------------------------------
June 6, 1986 204,786 $229,684,000 $1,121.58 112%
August 7, 1986 64,730 72,050,000 1,113.08 111%
November 25, 1986 25,200 27,670,000 1,098.01 110%
January 20, 1987 7,477 8,153,000 1,090.41 109%
March 11, 1987 15,500 16,795,000 1,083.56 108%
April 23, 1987 253 272,000 1,075.10 108%
May 7, 1987 4,329 4,657,000 1,075.75 108%
</TABLE>
Such cumulative Limited Partners' distributions included sales proceeds and
related interest totalling $211,670,000, or $656.80 per Unit. For income tax
purposes all cash distributions are a tax-free return of capital until the cash
received exceeds the tax basis of his/her partnership investment. Taxable income
or losses of the Partnership are passed through to the Partners for inclusion in
their respective tax returns, as reflected on the Federal Schedules K-1
distributed to the Partners each year.
Distributions per Unit paid or payable for each of the last five years
consist of the following:
Fiscal Distrbutable Sales
Year Cash Proceeds Total
------ ------------ -------- -------
1997 $ - $ - $ -
1996 - 123.41 123.41
1995 36.78 285.13 321.91
1994 50.00 186.67 236.67
1993 50.00 16.91 66.91
(d) Per Unit data is computed by dividing the Limited Partners' allocable
portion of the respective items by 322,275 Units. For financial reporting
purposes, net income or loss is allocated 90.16% to the Limited Partners
and 9.84% to the General Partners except for certain adjustments which may
be necessary in allocating gains and losses on property dispositions or
impairment writedowns.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Change in Fiscal Year
Effective January 1, 1997, the Partnership changed its fiscal year from a
twelve month period ending November 30 to a twelve month period ending December
31. During the 31 day transition period of December 1, 1996 through December 31,
1996, the Partnership incurred a net loss of approximately $37,000, which
reflects the net operations of the property and general and administrative
expenses of the Partnership, net of interest earned on the Partnership's
securities investments. The $162,000 decrease in cash and cash equivalents
primarily resulted from the operating loss as well as from disbursements for
redevelopment costs of the property.
Liquidity and Capital Resources
Because the land formerly known as Treasure Island is the last remaining
property investment of the Partnership, pursuant to Section 8.1 (ii) of the
Partnership's Amended and Restated Agreement of Limited Partnership, the sale of
this last property will cause the dissolution of the Partnership. The
Partnership will not be liquidated, however, until payment of a final
liquidating distribution to the Partnership's partners of all of the
Partnership's remaining assets. (see Item 3, Legal Proceedings, for a discussion
of local legislation, administrative requirements and litigation affecting the
potential disposition and value of this property).
At December 31, 1997, the Partnership and its consolidated joint venture
had cash and equivalents of approximately $6.4 million. Such funds are expected
to be utilized for reserve requirements, redevelopment of the property, working
capital requirements and, to the extent available, cash distributions to the
Partners. In total, cash and equivalents decreased $2,649,000 from fiscal 1996
to fiscal 1997 primarily due to disbursements for certain costs and expenses
related to the redevelopment of the property.
Cash used in operating activities primarily resulted from the Partnership's
operating loss as well as from disbursements for redevelopment costs of the
property, net of interest income earned on the Partnership's portfolio of cash
equivalents. Cash flows from operating activities decreased from 1996 to 1997
and from 1995 to 1996 primarily due to the sales of various real estate
investments in fiscal 1995 and 1996.
Cash flows from investing activities includes the receipt of proceeds from
the sales of real estate investments during the first half of fiscal 1996
totalling $42.9 million and $90.3 million in fiscal 1995. Cash flows from
investing activities are also affected by increases and decreases in the
Partnership's portfolio of cash equivalents. Such cash flows are affected by
disbursements for the redevelopment of the property.
Cash flows from financing activities relate entirely to distributions paid
to the Partners. Distributions of distributable cash and/or proceeds from the
sale of properties, if any, are made semi-annually on or before the last day of
the third month following the end of the six month period. Thus, distributions
relating to the second half of each year are paid in the first half of the
subsequent year. There were no distributions paid in fiscal 1997. Distributions
paid in the first half of fiscal 1996 included $83.7 million ($259.60 per Unit
paid in December 1995) relating to proceeds from sales of four real estate
investments in the second half of fiscal 1995 plus $5.9 million ($16.53 per Unit
paid in January 1996) of distributable cash related to the second half of fiscal
1995.
Cash Distributions
Considering reserve requirements for the costs associated with the
redevelopment and eventual sale of the property, the Partnership's last property
(which currently does not generate cash flows from operations), the Partnership
does not expect to make future cash distributions to Limited Partners until the
sale of this last property. Distributions of future sales proceeds will be made
in accordance with the Partnership's Amended and Restated Agreement of Limited
Partnership. Buyers and sellers of Units will receive such distributions in
accordance with the terms of the Partnership's transfer documents. The level and
timing of distributions of sales proceeds will be dependent on the timing of the
future sale of the remaining property and the ultimate sale price achieved, as
well as on reserve requirements.
<PAGE>
Results of Operations
Significant fluctuations in the Partnership's operating results for the
year ended December 31, 1997, as compared to the year ended November 30, 1996,
and for the year ended November 30, 1996, as compared to the year ended November
30, 1995, are primarily attributable to the following:
In fiscal 1996, the Partnership sold five real estate investments: Santa
Paula Shopping Center ("Santa Paula"), Lompoc Shopping Center ("Lompoc"), The
Macy's Building and its ground lease interest in 1801 Century Park East ("1801
Land") and Fullerton Business Center South ("Fullerton"). The sale of The Macy's
Building resulted in a gain to the Partnership of approximately $1.4 million,
while no gain or loss was recorded for the sale of the 1801 Land. For Santa
Paula and Lompoc a gain of $27,000 was recognized at the time of sale, while for
Fullerton, the Partnership recorded a loss at the sale date totaling $430,000.
In 1995 the Partnership considered the need for additional writedowns for
its properties, joint venture investments, and other real estate assets. In
light of the Partnership's previously anticipated six to nine month holding
period for its then remaining real estate investments, and based on the net
sales proceeds for the properties sold subsequent to November 30,1995 and the
most recent appraisals for the remaining properties, real estate investments
were written down in 1995 by $18.6 million.
In fiscal 1995, the Partnership recognized gains on sales of Sunrise
Terrace, Five Points Shopping Center and Bayhill Shopping Center ("Bayhill")
totaling $2.8 million. The Partnership had previously recorded provisions for
anticipated loss on the sale of Bayhill totaling $3.6 million.
The decreases in rental income, property operating expenses and
depreciation expense for 1997, as compared to 1996, and for 1996, as compared to
1995, primarily relate to the sales of various investments in fiscal 1996 and
1995.
The decrease in interest income for 1997, as compared to 1996, as well as
the decrease for 1996 as compared to 1995 primarily relates to earnings on the
net sales proceeds from the above mentioned property sales which had been
invested in the Partnership's portfolio of cash equivalents and marketable debt
securities prior to the distribution of such proceeds to the Partners.
The decrease in minority interest in consolidated joint venture's
operations for 1996 as compared to 1995, primarily relates to the fiscal 1995
sales of all of the ARCP's remaining investment properties.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURES
INDEX
PAGE
Report of Independent Auditors 23
Consolidated Balance Sheets,
December 31, 1997 and November 30, 1996 24
Consolidated Statements of Operations 25
for the Years Ended December 31, 1997,
November 30, 1996 and 1995
Consolidated Statements of Changes in Partners' Capital 26
for the Year Ended December 31, 1997,
the One Month Ended December 31, 1996,
and the Years Ended November 30, 1996 and 1995
Consolidated Statements of Cash Flows 27
for the Years Ended December 31, 1997,
November 30, 1996 and 1995
Notes to Consolidated Financial Statements 28
FINANCIAL STATEMENT SCHEDULES:
- -----------------------------
Real Estate and Accumulated Depreciation - Schedule III 38
________________________________________________________________________________
Schedules Note Filed:
All schedules except those indicated above have been omitted as the
required information is not applicable or the information is shown in the
consolidated financial statements or notes thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners
MLH Income Realty Partnership VI and
Consolidated Joint Ventures
We have audited the financial statements of MLH Income Realty Partnership
VI and consolidated joint ventures listed in the accompanying index to financial
statements (Item 8). These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements listed in the accompanying index
to financial statements (Item 8) present fairly, in all material respects, the
consolidated financial position of MLH Income Realty Partnership VI and
consolidated joint ventures at December 31, 1997 and November 30, 1996, and the
consolidated results of their operations and their cash flows for the year ended
December 31, 1997, and for each of the two years in the period ended November
30, 1996 in conformity with generally accepted accounting principles.
February 20, 1998
New York, New York
<PAGE>
<TABLE>
<CAPTION>
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND NOVEMBER 30, 1996
(Dollars in Thousands)
<S> <C> <C>
1997 1996
------------ ------------
ASSETS:
REAL ESTATE INVESTMENTS
Investment properties (Notes 1,2,3,4,8 and 9):
Land $ 26,716 $ 26,716
Other real estate assets 7,696 5,841
------------ ------------
Total real estate investments 34,412 32,557
------------ ------------
OTHER ASSETS:
Cash and equivalents (Notes 1 and 6) 6,434 9,083
Interest and other receivables, net of allowances
of $1,091 in 1997 and $1,600 in 1996 62 101
Prepaid expenses and other 8 4
------------ ------------
Total other assets 6,504 9,188
------------ ------------
TOTAL $ 40,916 $ 41,745
============ ============
LIABILITIES:
Accounts payable and accrued expenses $ 367 $ 319
Other liabilities 514 628
------------ ------------
Total liabilities 881 947
------------ ------------
PARTNERS' CAPITAL (Notes 1, 7 and 8):
General Partners:
Capital contributions 25 25
Cumulative income 20,405 20,405
Cumulative distributions (20,430) (20,430)
------------ ------------
-- --
------------ ------------
Limited Partners (322,275 Units):
Capital contributions, net of offering expenses 294,968 294,968
Cumulative income 104,348 105,111
Cumulative distributions (359,281) (359,281)
------------ ------------
40,035 40,798
------------ ------------
Total Partners' capital 40,035 40,798
------------ ------------
TOTAL $ 40,916 $ 41,745
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, NOVEMBER 30, 1996 and 1995
(In Thousands, Except Unit and Per Unit Data)
<S> <C> <C> <C>
1997 1996 1995
------------ ------------ ------------
OPERATING REVENUES:
Rental $ 740 $ 1,693 $ 15,600
Interest 405 2,396 3,236
Gains on sales of real
estate investments (Note 4) -- 1,369 2,769
------------ ------------ ------------
Total operating revenues 1,145 5,458 21,605
------------ ------------ ------------
OPERATING EXPENSES:
Property operating 1,555 2,303 5,490
Depreciation -- 288 2,916
General and administrative 316 757 1,020
Losses on sales of real estate investments
and provision for loss on impairment of
assets (Notes 1 and 4) -- 430 20,420
------------ ------------ ------------
Total operating expenses 1,871 3,778 29,846
------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS (726) 1,680 (8,241)
MINORITY INTEREST IN CONSOLIDATED
JOINT VENTURE'S OPERATIONS -- 1 (142)
------------ ------------ ------------
NET INCOME (LOSS) (Note 7) $ (726) $ 1,681 $ (8,383)
============ ============ ============
NET INCOME ALLOCATED TO GENERAL PARTNERS (Note 1) $ -- $ 4,320 $ 1,294
============ ============ ============
NET LOSS ALLOCATED TO LIMITED PARTNERS $ (726) $ (2,639) $ (9,677)
============ ============ ============
NET LOSS PER UNIT OF LIMITED PARTNERSHIP INTEREST $ (2.25) $ (8.19) $ (30.03)
============ ============ ============
UNITS OF LIMITED PARTNERSHIP INTEREST 322,275 322,275 322,275
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNER'S CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1997, THE ONE MONTH ENDED
DECEMBER 31, 1996 AND FOR THE YEARS ENDED NOVEMBER 30, 1996 AND 1995
(Dollars in Thousands)
<S> <C> <C> <C>
Limited
General Partners
Partners (322,275 Units) Total
------------ ------------ ------------
Balance November 30, 1994 $ -- $ 196,630 $ 196,630
Net income (loss) 1,294 (9,677) (8,383)
Distributions (1,294) (103,744) (105,038)
------------ ------------ ------------
Balance November 30, 1995 -- 83,209 83,209
Net income (loss) 4,320 (2,639) 1,681
Distributions (4,320) (39,772) (44,092)
------------ ------------ ------------
Balance November 30, 1996 -- 40,798 40,798
Net loss -- (37) (37)
------------ ------------ ------------
Balance December 31, 1996 -- 40,761 40,761
Net loss -- (726) (726)
------------ ------------ ------------
Balance December 31, 1997 $ -- $ 40,035 $ 40,035
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997
and November 30,1996 and 1995
(Dollars in Thousands)
<S> <C> <C> <C>
1997 1996 1995
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (726) $ 1,681 (8,383)
Items reconciling net income (loss) to net cash
provided by (used in) operating activities:
Gains on sales of real estate investments (Note 4) -- (1,369) (2,769)
Losses on sales of real estate investments
and provision for loss on impairment
of assets (Note 4) -- 430 20,420
Depreciation -- 288 2,916
Minority interest in consolidated joint
venture's operations -- (1) 142
Distributions of earnings to venture partner
in consolidated joint venture -- (85) (363)
Bad debt expense (85) 919 781
Changes in operating assets and liabilities:
Interest and other receivables 37 585 (1,162)
Accounts payable and accrued expenses 196 (517) (919)
Other assets and other liabilities, net (6) 108 652
--------- --------- ---------
Net cash provided by (used in)operating activities (584) 2,039 11,315
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of real estate investments,
net of selling expenses (Note 4) -- 42,901 90,339
Property improvements (1,903) (4,350) (7,123)
Settlement of escrow account -- 1,299 --
Funding of escrow account -- -- (1,299)
Maturities of marketable debt securities -- 80,948 37,021
Purchases of marketable debt securities -- (26,344) (72,306)
--------- --------- ---------
Net cash provided by (used in) investing activities (1,903) 94,454 46,632
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to partners -- (133,663) (84,562)
--------- --------- ---------
Net cash used in financing activities -- (133,663) (84,562)
--------- --------- ---------
NET DECREASE IN CASH AND EQUIVALENTS (2,487) (37,170) (26,615)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 8,921 46,253 72,868
--------- --------- ---------
CASH AND EQUIVALENTS, END OF PERIOD $ 6,434 $ 9,083 $ 46,253
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
MLH Income Realty Partnership VI (the "Partnership") was formed under the
New York Uniform Limited Partnership Act on December 4, 1984. The Partnership
made equity investments in nineteen income-producing properties located
throughout the United States.
The Partnership's last remaining real estate investment is the land
formerly known as Treasure Island (the "property"). Existing zoning permits use
of the property only as a mobile home park; however, the Managing General
Partner believes that changing the use of the property may maximize its value if
appropriate zoning and land use entitlements can be obtained. The property was
officially closed as a mobile park on March 15, 1996 and all former tenants have
vacated the property. Treasure Island Associates (TIA), the joint venture
between the Partnership and an unaffiliated entity through which the Partnership
owns an interest in the property, was involved in lawsuits concerning certain
tenants and the closing of the property as a mobile home park. See Note 9 for a
discussion of local legislation, administrative requirements and litigation
affecting the property.
Future Developements of the Property
On February 10, 1998, TIA announced that it has entered into a non-binding
agreement in principle with The Athens Group, for the sale of the property. The
Athens Group, a Phoenix, Arizona based real estate developer, plans to purchase
the property and to develop it as an oceanfront resort community. TIA owns the
fee interest in the property. Consummation of the sale is subject to several
conditions, including final approval by the City of Laguna Beach of an
acceptable Local Coastal Program/Specific Plan. The Laguna Beach Planning
Commission and the City Council gave preliminary approval of a Local Coastal
Program/Specific Plan for the project in a series of hearings through February
10, 1998. Final approval by the Planning Commission and the City Council is
expected in April or May 1998; approval by the California Coastal Commission is
expected in the fall of 1998. The entitlements for the property which are
actually granted by the Laguna Beach Planning Commission and the City Council
will affect the value and, therefore, pricing of the property. Assuming final
approval by the Planning Commission and the City Council is obtained, the
Partnership currently anticipates that the sale to The Athens Group will be
consummated. The sale to The Athens Group is expected to take place prior to
review of the project by the California Coastal Commission. However, there can
be no assurance that a sale will be consummated. If a sale to The Athens Group
does not take place, the Partnership will assess available alternatives at that
time but expects to continue processing the approvals through the California
Coastal Commission or to sell the property to another buyer.
The Partnership wishes to insure that statements made regarding expected
future developments regarding the property are accompanied by meaningful
cautionary statements pursuant to the safe harbor established in the Private
Securities Litigation Reform Act of 1995. These forward looking statements are
based upon current available data and reflect the Partnership's expectations
that the Partnership will successfully receive acceptance by the Laguna Beach
Planning Commission and the City Council and that the property will be sold to
The Athens Group. Actual receipt of such approvals and closing of the sale are
subject to future events and uncertainties which could materially affect the
value of the property and ability of the Partnership to receive these approvals
and consummate the sale. Among the factors which could materially affect the
Partnership's prospects for receiving the approvals and closing of the sale are:
(i) uncertainties regarding the granting of approvals by the Laguna Beach
Planning Commission and the City Council (ii) possible delays in the
administrative process required to obtain the approvals which are outside the
control of the Partnership, (iii) objections by third parties to the development
plan proposed by the Partnership for the property, including possible
litigation, which could significantly delay or ultimately prevent the receipt of
the approvals, and (iv) failure of The Athens Group to close for any reason.
There can be no assurance that the approvals will be obtained or that the sale
will be consummated. If the sale to The Athens Group is not consummated and the
Partnership continues processing the approvals through the California Coastal
Commission, there can be no assurance that the approvals will be obtained. If
the sale to The Athens Group is not consummated and the Partnership determines
to sell the property to another buyer, there can be no assurance that such sale
will be consummated.
Since this is the last remaining property investment of the Partnership,
pursuant to Section 8.1 (ii) of the Partnership's Amended and Restated Agreement
of Limited Partnership, the sale of this last property will cause the
dissolution of the Partnership. The Partnership will not be liquidated, however,
until payment of a final liquidating distribution to the Partnership's partners
of all of the Partnership's remaining assets.
The following is a summary of significant accounting policies followed by
the Partnership in the preparation of its consolidated financial statements:
<PAGE>
Principles of Consolidation
The consolidated financial statements include the accounts of the
Partnership and its joint venture: Treasure Island Associates and, through their
respective dates of liquidation, American Retirement Communities Partnership
("ARCP"), California Community Center Associates ("CCCA") and MLH Jersey City
Urban Renewal Partnership. Intercompany accounts and transactions have been
eliminated in consolidation.
Investment Properties and Related Depreciation
The net carrying value of the investment properties represents the total
cost to the Partnership (including purchase price and fees, acquisition fees,
property purchase costs) and the capitalization of improvements made subsequent
to acquisition, less impairment writedowns and accumulated depreciation.
Depreciation was generally provided using the straight-line method over
estimated lives of 35 years with certain improvements depreciated over shorter
estimated lives. Expenditures for construction-in-progress are included in other
real estate assets until placed in service. Routine repairs and maintenance are
expensed as incurred.
Other Real Estate Assets
Other real estate assets consist solely of redevelopment costs related to
Treasure Island Associates.
Impairment of Assets
The Partnership regularly considers the recoverability of the net carrying
values of its properties and other assets, and determines the need for any
writedowns when there has been a significant decline in market value. No
writedowns of assets were required in 1997 and 1996. Real estate investments
were written down in 1995 by $18,600,000 or $57.71 per Unit.
Cash Equivalents
The Partnership classifies its investments in debt securities, including
those considered to be cash equivalents, as securities held-to-maturity and
carries them at amortized cost on the accompanying consolidated balance sheet.
The purchase cost of such securities is included in "cash and equivalents" . All
such securities mature within one year, and any unrealized gains or losses on
these securities for the year ended December 31, 1997 are immaterial.
<PAGE>
Income Taxes
No provision for income taxes has been made since all income and losses are
allocated to the partners for inclusion in their tax returns.
Allocations Among Partners
Pursuant to the Partnership Agreement, Distributable Cash from operations
if any, will be allocated 90.16% to the Limited Partners and 9.84% to the
Managing General Partners. In addition to the distribution of cash from
operations, the Partnership Agreement provides for the General Partners, as a
class, to receive 2% of Sale or Financing Proceeds to be distributed,
representing their residual carried interest.
Net income or loss is allocated to the Partners in accordance with the
Partnership Agreeement.
Use Of Estimates
The preparation of the 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 at the
date of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
Change In Fiscal Year
Effective January 1, 1997, the Partnership changed its fiscal year from a
twelve month period ending November 30 to a twelve month period ending December
31. The first such fiscal year began on January 1, 1997 and ended on December
31, 1997. The following is condensed information regarding the consolidated
results of operations and cash flows for the 31 day transition period of
December 1, 1996 through December 31, 1996 (dollars in thousands):
Condensed Consolidated Statement of Operations:
Operating revenues............................... $ 86
Operating expenses............................... (123)
------
Net loss......................................... $ (37)
======
Net loss per Unit of Limited Partnership interest $(0.11)
======
Condensed Consolidated Statement of Cash Flows:
Net loss......................................... $ (37)
Changes in operating assets and liabilities...... (115)
------
Net cash used in operating activities............ (152)
Net cash used in investing activities............ (10)
------
Net Decrease in cash and equivalents............. (162)
Cash and equivalents, beginning of period........ 9,083
------
Cash and equivalents, end of period.............. $8,921
======
2. INVESTMENT PROPERTIES
The Partnership made equity investments in income-producing properties
located throughout the United States. Certain properties are owned through joint
venture arrangements (see Note 3), generally with affiliates of the Managing
General Partner who may be entitled to allocations of sales proceeds under
certain circumstances on disposition. All but one real estate investment ("the
property") has been sold (see Note 4). The investment in real estate (including
the consolidated joint venture interests) were composed of the following
property at December 31, 1997 and November 30, 1996 (dollars in thousands):
Dec. 31,
1997 Approximate
Number Size (Unaudited) 1997 1996
--------- --------------- ------- --------
Land held for redevelopment 1 27 acres $26,716 $ 26,716
======== ======= ========
<PAGE>
3. JOINT VENTURES
Treasure Island Associates
On August 1, 1989, the Partnership, through a joint venture partnership,
acquired an interest in a 266-space mobile home community located in Laguna
Beach, California for a total amount, including purchase price and fees, of
$43,000,000.
4. SALES OF REAL ESTATE INVESTMENTS
There were no sales during the year ended December 31, 1997.
During fiscal year 1996, the Partnership sold five real estate investments:
Santa Paula Shopping Center, Lompoc Shopping Center , The Macy's Building and
its ground lease interest in 1801 Century Park East and Fullerton Business
Center South. Net sales proceeds from these sales were approximately $42.9
million and the Partnership realized a net gain of $939,000.
During fiscal 1995, the Partnership sold four real estate investments:
Vista Diablo, Five Points Shopping Center, Bayhill Shopping Center, Port Jersey
Warhouse and Distribution Buildings and Sunrise Terrace. Net sale proceeds from
these sales were $90.3 million and the Partnership realized a net gain of
$949,000.
5. TRANSACTIONS WITH AFFILIATES
The Partnership reimburses the Managing General Partner (or an affiliate)
for certain expenses relating to the administration of the Partnership and its
properties, in accordance with the Partnership Agreement. In addition, an
affiliate of the Managing General Partner provided property management services
for one property (that was sold in 1996). For the years ended December 31, 1997,
November 30, 1996 and 1995, such reimbursable expenses were as follows:
1997 1996 1995
-------- --------- ---------
Direct out-of-pocket operating expenses... $111,000 $ 341,000 $ 499,000
Property management fees.................. -- 1,000 62,000
6. CASH EQUIVALENTS AND MARKETABLE DEBT SECURITIES
The following is a summary of the Partnership's held-to-maturity
securities, which are classified as cash equivalents and marketable debt
securities on the accompanying consolidated balance sheets (see also Note 1) (in
thousands):
Gross Gross Estimated
Unrealized Unrealized Market
Cost Gains Losses Value
------- ---------- ---------- ---------
December 31, 1997:
- -----------------
Cash equivalents:
Commercial paper............ $ 6,319 $ 54 $ -- $ 6,373
======= ======= ====== =======
November 30, 1996:
- -----------------
Cash equivalents:
Commercial paper............ $ 2,907 $ 24 $ -- $ 2,931
======= ======= ====== =======
All of the Partnership's investments in debt securities are classified as
held-to-maturity and, at December 31, 1997, have scheduled maturities of less
than one year. There were no gross realized gains or losses on sales of
held-to-maturity securities in 1997, 1996 and 1995.
<PAGE>
7. RECONCILIATION OF INCOME TAX METHOD OF ACCOUNTING
The differences between the method of accounting for income tax reporting
and the accrual method of accounting used in the accompanying consolidated
financial statements are explained below. Since there are two classes of Limited
Partner Depository Units, Class A Units (which were sold to individuals and
entities which are not exempt from taxation) and Class B Units (which were sold
to tax exempt entities), tax basis net income (loss) and partners' capital are
shown for each Limited Partner class and for the General Partners. The primary
difference in the allocation of taxable income (loss) between Class A and Class
B partners is that all depreciation items are allocated to Class A Limited
Partners through September 30, 1993.
Year Ended
December 31, November 30,
----------- -------------
1997 1996 1995
----------- --------- ---------
Net income(loss)-financial
statements, year-end December 31, 1997
and November 30, 1996 and 1995 $ (726) $ 1,681 $ (8,383)
Differences resulting from:
Depreciation (238) (334) (133)
Gains and losses on sales of real
estate investments -- (17,663) 4,488
Provision for impairment of assets -- -- 18,600
Bad debt expense (572) -- (2)
--------- --------- ---------
Net income-income tax method,
year-end December 31, 1997
and November 30, 1996 and 1995 $ (1,536) $ (16,316) $ 14,570
========= ========= =========
Limited Partners' share-Class A $ (774) $ (10,394) $ 10,291
========= ========= =========
Limited Partners' share-Class B $ (762) $ (10,242) $ 2,815
========= ========= =========
General Partners' share $ -- $ 4,320 $ 1,464
========= ========= =========
Partners' capital-financial statements,
as of December 31, 1997 and November
30, 1996 and 1995 $ 40,035 $ 40,798 $ 83,209
Cumulatve differences resulting from:
Depreciation (15,909) (15,652) (15,318)
Gains and losses on sales of real
estate investments (10,112) (10,112) 7,551
Provision for impairment of assets 43,041 43,041 43,041
Other 1,657 2,077 2,077
--------- --------- ---------
Partners, capital-income tax method,
as of December 31, 1997 and November
30, 1996 and 1995 $ 58,712 $ 60,152 $ 120,560
========= ========= =========
Limited Partners' share-Class A $ 29,573 $ 30,299 $ 60,726
========= ========= =========
Limited Partners' share-Class B $ 29,139 $ 29,853 $ 59,834
========= ========= =========
8. NET ASSET VALUE AND APPRAISALS (UNAUDITED)
The Partnership's Capital per Unit for financial reporting was $124.23 as
of December 31, 1997 which approximates the Partnership's net asset value per
Unit as of the same date. The net asset value was based upon the estimated
future value of the property, together with other assets less liabilities and
less the General Partners' 2% residual carried interest in future sale proceeds.
Cumulative cash distributions from all sources totalled $1,121.58 per Unit for
Limited Partners admitted on June 6, 1986. The net asset value per Unit at
December 31,1997 plus cumulative cash distributions to Limited Partners admitted
on June 6, 1986 totalled $1,246.00 per Unit.
<PAGE>
9. LITIGATION
TREASURE ISLAND ASSOCIATES LITIGATION
The Partnership owns a joint venture partnership interest in the property
formerly known as Treasure Island (the "Property"), a mobile home community
located in Laguna Beach, California. The Property was purchased by Treasure
Island Associates ("TIA"), a joint venture partnership between the Partnership
and an unaffiliated entity, on August 1, 1989. In October 1991, the City of
Laguna Beach (the "City") enacted an ordinance (the "Ordinance") which requires
mobile home park owners to apply for a conditional use permit ("CUP") prior to a
closure of a mobile home park. On April 30, 1992 in compliance with the
ordinance TIA applied to the City for CUP.
On February 15, 1994, the Laguna Beach City Council adopted a resolution
(the "Resolution") approving the CUP and adopting findings that Treasure Island
was deemed to have closed on may 1, 1992, and that such closure adversely
impacted tenants. The resolution require TIA to mitigate the adverse impact of
the closure on tenants through conditions TIA deemed violative of California
law.
On March 24, 1994, TIA filed a lawsuit in the California Superior Court for
the County of Orange ("the Court") challenging the mitigation conditions
Treasure Island Residents and Owners Association ("TIROA") intervened in this
action. On October 4, 1994, the Court issues a Writ of Mandate directing, among
other things, the City to amend the resolution limiting mitigation measures,
i.e., payment of relocation benefits to tenants whose principal place of
residence on May 1, 1992, was Treasure Island. On December 21, 1994, the court
filed its final decision from which TIROA appealed and TIA cross-appealed.
On November 15, 1994, the City adopted an Amended resolution ("Amended
Resolution") effectively complying with the Court's writ of Mandate although
TIA, again, deemed the mitigation measures legally invalid. Accordingly, on
February 14, 1995, in order to preserve TIA's right to challenge the validity of
the mitigation measures reimposed by the Amended resolution, TIA filed a second
lawsuit with the court. TIROA also intervened in this action.
On May 2, 1995, the City adopted a second amended resolution ("the Second
Amended resolution") reducing substantially the total amount of relocation
benefits potentially payable to residents as a mitigation measure. Accordingly,
on September 1, 1995, TIA executed a settlement agreement with the City which
settled all lawsuits filed by TIA against the City concerning the closure of the
mobile home park. Under the settlement agreement, TIA agreed to (i) deliver a
letter of credit to the City in the amount of $1,270,990 to secure TIA's
obligations under the settlement agreements with residents (described in the
following paragraph), and (ii) pay an additional sum of approximately $1,000,000
tot he City to mitigate the adverse impact to the City's supply of low to
moderate income housing, $500,000 of which was paid in September 1995, with the
balance to be paid at a future date. According to the agreement of the City and
TIA, the letter of credit expired on June 30, 1996, and was not renewed.
Following the adoption of the Second Amended resolution, TIA entered into
settlement agreements for 84 tenant spaces out of a total of approximately 159
remaining tenant spaces under which the settling tenants released TIA from all
claims in consideration of cash payments and/or up to one year free rent. These
agreements required the payment of a total of approximately $2,400,000 which has
been paid. All but one of the tenants who signed a settlement agreement at that
time have vacated the property. The one remaining settling tenant, who is an
employee of the managing agent, will vacate when his employment terminates.
Of the remaining tenants who did not enter into a settlement agreement with
TIA in 1995 following adoption of the Second Amended Resolution, 62 began or had
been, withholding rent and refusing to vacate the property, claiming they were
owed relocation benefits under the Amended resolution and that the Second
Amended Resolution was invalid. On or about April 1995, TIA initiated unlawful
detainer actions (the "non-payment unlawful detainers") against these tenants in
the South Orange County Municipal Court to obtain possession of its property,
back rent, and damages.
On May 26, 1995, TIROA filed a lawsuit with the court alleging that the
City Council's attempt to reduce relocation benefits in the Second Amended
Resolution was illegal and therefore invalid. Alternatively, TIROA challenged
the validity of the Second Amended resolution on environmental and other
grounds. In addition, on June 16, 1995, 73 tenants and former tenants, some of
whom had been named in the non-payment unlawful detainers, filed with the Court
a lawsuit alleging TIA had breached the implied covenant of good faith and fair
dealing, unlawfully discriminated, breached the covenant of quiet enjoyment
and/or constructive eviction, violated antitrust laws, and committed unlawful,
unfair and fraudulent business practices, and for declaratory relief. The
complaint sought damages and injunctive relief for alleged wrongful conduct in a
series of actions relating to park closure and eviction through the non-payment
unlawful detainers. These same tenants or former tenants also, on June 16, 1995,
filed an action in the United States District Court for the Central District of
California (the "Federal Action") alleging violations of the antitrust
provisions of the Sherman and Clayton Acts seeking damages in the estimated
amount of $15,000,000 and injunctive relief. The allegations contained in the
Federal Action mirrored in the action filed with the Court on the same day.
On September 1, 1995, TIA, pursuant to the Second Amended Resolution and
California law, gave written notice that all tenancies in Treasure Island,
exclusive of those tenants who had signed a settlement agreement in 1995, would
terminate based upon TIA's CUP closing the park and payment of relocation
benefits and that Treasure Island would actually close March 15, 1996.
In accordance with the Second Amended Resolution, TIA, on February 6, 1996,
mailed to all tenants who had not entered into a settlement agreement in 1995,
and has TIA determined qualified for relocation benefits, checks in an amount
not to exceed $20,000 per tenant.
On the date Treasure Island actually closed, March 15, 1996, all tenants
who had not signed settlement agreements in 1995 refused to vacate the property
pursuant to the September 1, 1995, written notice given by TIA. TIA in or about
mid and late March 1996, initiated unlawful detainer actions against these
remaining tenants based upon park closure (the "closure unlawful detainers".)
On march 26, 1996, Mr. K.P. Rice and 100 other tenants, and former tenants,
including virtually all tenants who were defendants in the non-payment unlawful
detainers, and closure unlawful detainers, as well as Plaintiffs in the action
filed with the Court on June 16, 1995, filed another action against TIA with the
court alleging claims for declaratory relief, damages, damages for statutory
violations, and unlawful, unfair or fraudulent business practices.
Following a series of pretrial procedures TIROA's lawsuit challenging the
Second Amended Resolution and the tenants' actions filed with the Court were
consolidated and transferred to the Court's Complex Litigation Panel. In
addition, the non-payment unlawful detainers and closure unlawful detainers were
consolidated and likewise transferred to the Court's Complex Litigation Panel.
The court rejected TIROA's challenge to the Second Amended Resolution and
upheld the Second Amended Resolution entering judgement against TIROA and in
favor of TIA. In addition, the Court bifurcated the issue of possession and
entered a judgement of possession in favor of TIA against all tenants in the
consolidated unlawful detainer actions. Both TIROA and the tenants appealed the
adverse judgements.
Following entry of judgement against TIROA and the tenants, and the ensuing
appeals, TIA, the tenants and TIROA entered into settlement discussions that
culminated in settlement agreements to settle all litigation among them. Under
the terms of the settlement agreements, the tenants and TIROA have released all
claims against TIA and the tenants are obligated to pay TIA a total sum of
approximately $807,000 as well as dismiss all actions. The tenants have also
dismissed their appeal of the judgement of possession. TIA under the terms of
its settlement agreements with various tenants. The settlement agreement with
TIROA has been fully executed and performed and all TIROA refused to sign a
settlement agreement, or have not fully performed their settlement agreement, or
are attempting to renegotiate their settlement. TIA to date has collected
approximately $538,000 in settlement funds from the tenants. TIA anticipates
that the eleven unsigned or unperformed settlement agreements will either be
signed, fully performed, or a judgement entered for money damages against the
tenants pursuant to the settlement by May 15, 1998.
The Federal Action was on TIA's motion dismissed and judgement entered in
favor of TIA. On appeal, the United States Court of Appeals for the Ninth
Circuit affirmed the dismissal."
TIA intends to capitalize the cost of all of the above settlements as part
of its investment in the property related to any redevelopment efforts.
On June 10, 1996, another action was filed against TIA by one individual,
David B. Mautner. Mr. Mautner claims to have been improperly denied relocation
benefits allegedly owed to him under the resolutions. In a statement of damages,
he seeks special damages of $40,000, general damages of $100,000 and punitive
damages of $200,000. This case has been dismissed with prejudice.
On May 2, 1996, Mr. George Posey, a nonresident tenant, filed an action in
Orange County Superior Court against TIA for Trespass, Constructive Eviction,
Breach of Covenant of Quiet Enjoyment, Declaratory Relief, and Unfair Business
Practices. TIA successfully demurred to the complaint and a first amended
complaint was filed July 19, 1996, seeking to Set Aside Warehouseman's Lien
Sale, Cancellation of Instrument, Declaratory Relief, Malicious Prosecution,
Constructive Eviction, Breach of Covenant of Quiet Enjoyment, Trespass, and
Unfair Business Practices. Mr. Posey claims that TIA wrongfully sold his
mobilehome at a warehouseman's lien sale and thereafter denied him entry to the
mobilehome. In a statement of damages he seeks special damages of $50,000,
general damages of $250,000, and punitive damages of $500,000. This case is
pending as a related case with the damages cases filed by the other tenants. TIA
is conducting discovery on this claim. No trial date has been set.
In February of 1996, the Partnership submitted a development proposal to
the City of Laguna Beach for the redevelopment of the Property. The initial
application included a combination of detached single-family residences,
multi-family housing and a resort hotel complex including meeting rooms and
restaurants. The application consisted of a local coastal program ("LCP") and a
specific plan reflecting such uses. An LCP is required by California law because
the City has not obtained approval from the California Coastal Commission for a
Local Coastal Program for the Property as required by the California Coastal
Act.
After receiving input on the development proposal from community groups,
City Planning Staff and Planning Commissioners, the application was suspended on
July 30, 1996 and a revised application was submitted in March, 1997. The
revised development proposal has been reduced in scale and describes a project
consisting of a resort center with up to 250 guest rooms and associated
conference, restaurant and parking facilities, 47 single-family lots and
approximately 11.6 acres of public open space. A draft Environmental Impact
Report required by the California Environmental Quality Act was prepared to
examine the environmental impacts of the project and was released to the public
on August 25, 1997. California law requires a 45-day public review period before
the development proposal may be approved by the City Planning Commission.
<PAGE>
On February 10, 1998, TIA announced that it has entered into a non-binding
agreement in principle with The Athens Group, for the sale of the property. The
Athens Group, a Phoenix, Arizona based real estate developer, plans to purchase
the property and to develop it as an oceanfront resort community. TIA owns the
fee interest in the property. Consummation of the sale is subject to several
conditions, including final approval by the City of Laguna Beach of an
acceptable Local Coastal Program/Specific Plan. The Laguna Beach Planning
Commission and the City Council gave preliminary approval of a Local Coastal
Program/Specific Plan for the project in a series of hearings through February
10, 1998. Final approval by the Planning Commission and the City Council is
expected in April or May 1998; approval by the California Coastal Commission is
expected in the fall of 1998. The entitlements for the property which are
actually granted by the Laguna Beach Planning Commission and the City Council
will affect the value and, therefore, pricing of the property. Assuming final
approval by the Planning Commission and the City Council is obtained, the
Partnership currently anticipates that the sale to The Athens Group will be
consummated. The sale to The Athens Group is expected to take place prior to
review of the project by the California Coastal Commission. However, there can
be no assurance that a sale will be consummated. If a sale to The Athens Group
does not take place, the Partnership will assess available alternatives at that
time but expects to continue processing the approvals through the California
Coastal Commission or to sell the property to another buyer.
PARTNERSHIP LITIGATION
On November 29, 1995, December 15, 1995, December 22, 1995, and February 6,
1996, certain putative class actions were filed purportedly on behalf of, among
others, all persons who purchased limited partnership interests in the
Partnership. Pursuant to an order of the United States District Court for the
Southern District of New York dated February 25, 1996, these actions have been
consolidated in that Court for pre-trial purposes under the caption In re
Merrill Lynch Limited Partnerships Litigation (the "New York Consolidated
Action"). Pursuant to that order, on March 29, 1996, the plaintiffs filed a
First Consolidated Amended Class Action Complaint (the "Amended Complaint"),
which superseded the allegations in the complaints mentioned above. In addition
to investors of the Partnership, the Amended Complaint was filed purportedly on
behalf of all persons who purchased limited partnership interests in certain
other limited partnerships formed by affiliates of the Managing General Partner
and for which the Managing General Partner has acted or acts as a general
partner, and certain other limited partnerships for whom Merrill Lynch, Pierce
Fenner & Smith Incorporated ("MLPF&S") acted as selling agent (all such
partnerships other than the Partnership are hereinafter referred to as the
"Other Partnerships"), against MLH Property Managers Inc. and MLH Realprop
Associates VI L.P. (the "General Partners"), certain affiliates of the General
Partners, Merrill Lynch & Co., Inc. ("ML & Co."), MLPF&S, Merrill Lynch, Hubbard
Inc. ("MLH"), and certain direct or indirect subsidiaries and/or affiliates of
ML & Co., as defendants (collectively, the "Defendants 1"). The Partnership and
certain of the Other Partnerships were originally named as defendants in certain
of the actions, but those partnerships were not named in the Amended Complaint.
Plaintiffs' complaint alleges that the Defendants 1 (i) violated the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), (ii) engaged in fraud and
negligent misrepresentation in connection with the sale of limited partnership
interests in the Partnership and the Other Partnerships, (iii) breached their
fiduciary duties, and (iv) breached their contracts or tortiously interfered
with express or implied contracts and covenants. The action seeks compensatory,
consequential, treble, general and punitive damages, disgorgement and
restitution, the costs and expenses incurred in connection with the action,
reasonable attorneys' fees, and such other and further relief as the Court may
deem just and proper. On July 17, 1996, the court endorsed a stipulation and
order which provides for (a) the dismissal without prejudice of claims relating
to certain of the Other Partnerships; (b) the certification of a plaintiff class
as to certain of the claims alleged in the Amended Complaint; and (c) the filing
of a supplemental pleading in the action adding claims under the New Jersey
Securities Fraud statute and the New Jersey Criminal Justice Act of 1970. On
September 27, 1996, the Partnership and other defendants moved to dismiss the
Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and
9(b), on the grounds, among others, that the claims contained in the Amended
Complaint were barred by the statute of limitations. At a hearing held on
October 15, 1996, the Court granted plaintiffs until January 17, 1997 to file a
second consolidated amended class action complaint ("Second Amended Complaint")
and held that Defendants 1's motion would be deemed withdrawn. Plaintiffs filed
their Second Amended Complaint on January 17, 1997. Defendants 1 moved to
dismiss the Second Amended Complaint on February 17, 1997. On August 26, 1997,
the Honorable Michael B. Mukasey, United States District Judge in the Southern
District of New York, issued a 51-page Opinion and Order granting the
Defendants' motion to dismiss the Consolidated Action. Finding that plaintiffs'
RICO claims were barred by the applicable statutes of limitations, the District
Court dismissed plaintiffs' RICO claims with prejudice and dismissed the
remaining state law claims for lack of subject matter jurisdiction. The District
Court declined to grant plaintiffs leave to replead. On September 24, 1997,
plaintiffs filed a notice of appeal with Second Circuit Court of Appeals.
Plaintiffs' appeal has now been fully briefed and the parties are awaiting a
decision by the Second Circuit. Defendants 1 intend to contest Plaintiffs'
claims vigorously. The Partnership may be obligated to indemnify certain of the
Defendants 1 for loss, liability, claim, damage and expense subject to the terms
and conditions of the indemnity provisions of the Agency Agreement dated March
5, 1986 among the Partnership, its General Partners and MLPF&S. The ultimate
outcome of this action is not determinable at this time.
<PAGE>
On January 22, 1996, a putative class action was filed in the Superior
Court of New Jersey, Essex County, purportedly on behalf of all persons who
purchased limited partnership interests in the Partnership and other limited
partnerships formed by affiliates of the Managing General Partner and for which
the Managing General Partner has acted or acts as a general partner. As amended,
the complaint names MLH, MLPF&S, ML & Co., Merrill Lynch Realty, Inc., certain
past and present employees of MLH, the Partnership and certain other limited
partnerships for which MLPF&S acted as selling agent (collectively, the
"Defendants 2") as defendants. The complaint alleges (i) common law fraud and
deceit; (ii) equitable fraud; (iii) negligent misrepresentation; (iv) breach of
fiduciary duty; (v) breach of implied covenant of good faith and fair dealing;
(vi) violation of the New Jersey Securities Fraud statute; and (vii) violation
of the New Jersey Criminal Justice Act of 1970; allegedly as a result of
material misrepresentations and omissions of fact in connection with the sale of
limited partnership interests in the Partnership and such other limited
partnerships, the subsequent concealment of the fraud alleged, and the alleged
conduct of the Defendants 2 in the management and operation of the Partnership
and such other limited partnerships. The action seeks (i) unspecified damages
including compensatory, general, consequential, treble, incidental, punitive,
and exemplary damages; (ii) disgorgement and restitution of earnings, profits,
compensation and benefits received by Defendants 2; (iii) interest; (iv) costs
including attorneys', accountants' and experts' fees, and (v) such other relief
as the Court deems just and proper. Defendants 2 believe that they possess
meritorious defenses to the claims in this action, and intend to contest such
claims vigorously. On or about March 25, 1996, Defendants 2 moved to dismiss or
stay this action in favor of the New York Consolidated Action, and on June
24,1996, the Court ordered the action stayed until August 9, 1996. On August 9,
1996, the Court orally ruled that the action would be dismissed without
prejudice in favor of the New York Consolidated Action. The Court signed a
written order of dismissal on August 26, 1996. The Partnership may be obligated
to indemnify certain of the Defendants 2 for loss, liability, claim, damage and
expense subject to the terms and conditions of the indemnity provisions of the
Agency Agreement dated March 5, 1986 among the Partnership, its General Partners
and MLPF&S. The outcome of this action is not determinable at this time.
On or about February 6, 1996, a putative class action was filed in the
Circuit Court for Baltimore City, Maryland and on February 13, 1996, an amended
complaint was filed, purportedly on behalf of all persons who purchased
unspecified limited partnership interests, which may include interests in the
Partnership, against ML & Co., MLPF&S, and a limited partnership for which
MLPF&S acted as selling agent, as defendants (collectively, the "Defendants
3").The amended complaint alleges that the Defendants 3 (i) made material
misrepresentations and omitted material information in the offering of interests
in the specified limited partnership and other unspecified limited partnerships;
(ii) breached their fiduciary duties; (iii) were unjustly enriched; and (iv)
converted the personal property of the plaintiff and other putative class
members. The action seeks (i) unspecified compensatory and punitive damages;
(ii) equitable and injunctive relief, including disgorgement of gain, a
constructive trust on all fees, discounts and commissions, impounding or
attachment of ill-gotten moneys, freezing of assets, and restitution; (iii)
reasonable attorneys' fees, costs and expenses incurred in connection with the
action; (iv) pre- and post-judgment interest; and (v) such other and further
relief as the court may deem necessary or appropriate. Defendants 3 believe that
they possess meritorious defenses to the claims in the action, and intend to
contest such claims vigorously. The Partnership may be obligated to indemnify
certain of the Defendants 3 for loss, liability, claim, damage and expense
subject to the terms and conditions of the indemnity provisions of the Agency
Agreement dated March 5, 1986 among the Partnership, its General Partners and
MLPF&S. By stipulation the parties to the action have agreed to stay this matter
pending further proceedings in the New York Consolidated Action. The outcome of
this action is not determinable at this time.
On May 9, 1996, a putative class action was filed in the Supreme Court of
the State of New York, County of New York, purportedly on behalf of all persons
who purchased limited partnership interests in the Partnership and certain other
limited partnerships formed by affiliates of the Managing General Partner,
against ML & Co., MLPF&S, the General Partners, and certain affiliates of MLH,
as defendants (collectively, the "Defendants 4"). The complaint alleges (i)
fraud; (ii) negligent misrepresentation; (iii) breach of fiduciary duty; (iv)
breach of third party beneficiary contract; and (v) breach of implied covenant.
The action seeks (i) an order certifying the proposed Class; (ii) compensatory
damages; (iii) consequential damages; (iv) general damages; (v) punitive
damages; (vi) disgorgement and restitution; (vii) costs and disbursements;
(viii) reasonable attorneys' fees; and (ix) such other and further relief as the
Court may deem just and proper. On May 29, 1996, the parties entered into a
stipulation to dismiss the action without prejudice, based on the existence of
the New York Consolidated Action. Based on that stipulation, Defendants 4 moved
for an order dismissing the action without prejudice. On or about July 9, 1996,
the Court entered an order dismissing the action without prejudice.
<PAGE>
<TABLE>
SCHEDULE III
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<S> <C> <C> <C>
Cost
Capitalized
Initial Cost to Subsequent to Gross Amount at which Carried
Partnership (A) Acquisition at Close of Period (B) (C)
--------------------- ----------- ----------------------------
Buildings Land, Bldgs Buildings
and and and
Encum Improve Improve Impairment Improve Accumulated
Description -brances Land -ments -ments Writedown (E) Land -ments Total Depreciation(D)
- ------------------------- -------- ----------- --------- ---------- ------------- ---------- ------- ---------- ---------------
Land (formerly known
as Treasure Island)
Laguna Beach, California - 38,924,000 4,076,000 2,275,000 (18,559,000) 26,716,000 - 26,716,000 -
======== ========== ========= ========== ============ ========== ======= ========== ===============
Estimated
Useful lives
Used in
Computation of
Date of Date Depreciation and
Contruction Acquired Amoritization
- ----------- -------- -----------------
1937 8/01/89 35 years
See Notes 2, 3, 4 and 8 of Notes to Consolidated Financial Statements.
(A) The initial cost to the Partnership is the contract purchase price of the properties at the date of the purchase.
(B) The aggregate cost of properties owned at December 31, 1997 for Federal income tax purposes was $46,288,000.
(C) Reconciliation of investment properties owned: 1997 1996 1995
----------- ----------- -------------
Opening balance $26,716,000 $71,624,000 $ 190,369,000
Sales of investment properties 0 (45,458,000) (104,639,000)
Retirements - - (1,090,000)
Provision for loss on impairment of assets - - (18,600,000)
Improvements - 550,000 5,584,000
----------- ----------- -------------
Balance at end of period $26,716,000 $26,716,000 $ 71,624,000
=========== =========== =============
(D) Reconciliation of accumulated depreciation: 1997 1996 1995
----------- ----------- -------------
Opening balance $ - $ 6,483,000 $ 20,119,000
Sales of investment properties - (6,771,000) (15,462,000)
Retirements - - (1,090,000)
Depreciation expense - 288,000 2,916,000
----------- ----------- -------------
Balance at end of period $ - $ - $ 6,483,000
=========== =========== =============
(E) The Partnership recorded impairment writedowns to its real estate investments in 1995, 1994 and 1992, as detailed below:
Property: 1995 1994 1992
----------- ----------- -------------
Land (formerly known as Treasure Island) $ 8,000,000 $ 3,300,000 $ 7,259,000
Fullerton Business Center 900,000 2,400,000 4,521,000
Lompoc Shopping Center -CCCA (sold 1/24/96) 5,300,000 2,000,000 -
Santa Paula Shopping Center -CCCA (sold 1/24/96) 4,400,000 - -
Bayhill Shopping Center - CCCA (sold 9/27/95) - 1,000,000 2,161,000
CCCA Basis Step-up (disposed 9/27/95) - 500,000 -
Port Jersey Warehouse/Distribution Center - - -
(sold 7/6/95, except for the Macy's Building) - 1,300,000 -
----------- ----------- -------------
$18,600,000 $10,500,000 $ 13,941,000
=========== =========== =============
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Partnership is a limited partnership and has no directors or officers.
The names and dates of election of the directors and the executive officers
of the Managing General Partner are as follows:
Date of
Name Officer Election
- ----------------------------- ------------------- -----------
Jack A. Cuneo Director, 8/22/84
Chairman, Chief
Executive Officer, 5/1/97
President and Chief
Operating Officer 3/31/97
Robert A. Aufenanger Director and 3/3/97
Senior Vice President 5/1/97
James V. Caruso Director and 4/30/97
Vice President 1/1/97
Christina M. Titus Executive Vice President 2/1/98
Audrey A. Bommer Chief Financial Officer and
Vice President 7/1/97
D. Bruce Brunson was President and Chief Operating Officer of the Managing
General Partner of the Partnership from January 31, 1995 through March 1, 1997,
and Director, Chairman and Chief Executive Officer of the Managing General
Partner of the Partnership from September 12, 1991 through his departure from
Merrill Lynch, Hubbard Inc. ("Hubbard") on May 1, 1997.
Thomas J. Brown was a Director and Executive Vice President of the Managing
General Partner of the Partnership from August 22, 1984 through his departure
from Hubbard on January 31, 1997. Michael A. Karmelin was Chief Financial
Officer and Vice President of the Managing General Partner of the Partnership
from May 15, 1994 through his departure from Hubbard on April 30, 1997. Joseph
S. Valenti was Chief Financial Officer and Vice President of the Managing
General Partner of the Partnership from May 1, 1997 through July 1, 1997. George
I. Wagner was Senior Vice President of the Managing General Partner of the
Partnership from June 30, 1994 through his departure from Hubbard on January 31,
1998.
There is no family relationship among any of the foregoing persons. All of
the directors have been elected to serve until the next annual meeting of
shareholders of the Managing General Partner or until their successors are duly
elected and qualify or until their earlier death, resignation or removal. All of
the officers have been elected to serve until their successors are elected and
qualify or until their earlier death, resignation or removal.
Merrill Lynch & Co., Inc. ("ML&Co.") and its subsidiaries, MLPF&S and
Hubbard are affiliated with the Registrant. No other entity mentioned in the
following biographical summaries is affiliated with the Registrant.
The business experience of the directors and executive officers of the
Managing General Partner is indicated below.
Jack A. Cuneo (age 50) joined MLPF&S in 1975 and became a Director of the
Managing General Partner of the Partnership on August 22, 1984. Mr. Cuneo became
President and Chief Operating Officer of the Managing General Partner of the
Partnership effective March 1, 1997 and was elected Chairman and Chief Executive
Officer on May 1, 1997. Mr. Cuneo is responsible for real property acquisitions
and dispositions. Prior to joining MLPF&S, he was a consultant and real estate
broker in Massachusetts specializing in commercial, residential and investment
properties. He is a graduate of the City College of New York and did
post-graduate work toward a Ph.D. and lectured part-time at the University of
Massachusetts from 1969 to 1972. Mr. Cuneo is Vice Chairman of the Commercial
and Retail Development Council of the Urban Land Institute and is a member of
the Policy Advisory Board of the Center for Real Estate and Urban Economics at
the University of California at Berkeley.
<PAGE>
Robert F. Aufenanger (age 44) is a Director and Senior Vice President of
the Managing General Partner of the Partnership. He joined Merrill Lynch in 1980
and is a Vice President of its Corporate Credit Department and a Director of the
Partnership Management Department where he is responsible for the ongoing
management of the operations of certain Merrill Lynch limited partnerships where
Merrill Lynch subsidiaries serve as general partner.
James V. Caruso (age 46) has been a Vice President of the Managing General
Partner of the Partnership since January 1997 and a Director since April 1997.
Mr. Caruso joined Merrill Lynch in 1975 and is a Director in its Investment
Banking Group ("IBK"). He is responsible for managing the IBK Corporate
Accounting Department and the Controller's area of the Partnership Analysis &
Finance Group. Since June, 1992 Mr. Caruso has also performed administrative
services for Merrill Lynch's retail partnerships. He is a graduate of Pace
University.
Christina M. Titus (age 47) joined Hubbard in 1980 and is Executive Vice
President of the Managing General Partner of the Partnership. Prior to joining
Hubbard, she was associated with the law firm of Trubin Sillcocks, New York, New
York. Ms. Titus graduated from Georgetown University Law School and is a member
of the New York Bar.
Audrey Bommer (age 31) is a Vice President and the Chief Financial Officer
of the Managing General Partner of the Partnership, and is responsible for its
accounting, treasury and tax functions. Ms. Bommer joined ML&Co. in 1994. Prior
to joining ML&Co., Ms. Bommer held senior accounting positions at
Metallgesellschaft Corp. and Grant Thornton, LLP.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners are entitled to receive a share of cash distributions,
when and as cash distributions are made to the Unit Holders, and a share of
taxable income or tax loss. Descriptions of such distributions and allocations
are contained in Item 7 above, which descriptions are incorporated herein by
reference.
The General Partners as a class may, under certain circumstances, for any
fiscal semi-annual period defer and/or waive all or a portion of, their share of
Distributable Cash. Any amount so deferred or waived shall be distributed to the
Unit Holders. Amounts which are deferred by the General Partners shall be
payable to the General Partners at any time they so elect from available cash.
If the General Partners have not made such an election with respect to all of
such deferred portion of Distributable Cash prior to the liquidation of the
Partnership, then the General Partners shall receive an amount equal to all of
their remaining deferred portion of Distributable Cash and shall thereafter not
defer any other Distributable Cash. Upon making a waiver, the General Partners
relinquish their right to receive the amount so waived.
The General Partners did not receive any cash distributions for the fiscal
year ended December 31, 1997.
The General Partners and their affiliates were paid certain fees and
commissions and reimbursed for certain out-of-pocket expenses (including
specifically allocated payments for salaried employees rendering certain
services). Information concerning such fees, commissions and reimbursements is
contained in Note 5 of Notes to Consolidated Financial Statements in Item 8
above, which information is incorporated herein by reference.
Affiliates of the General Partners may be paid fees, subject to certain
conditions, for providing property management or leasing services with respect
to some Partnership properties, for providing mortgage brokerage services in
connection with financing properties or for acting in the normal course of its
business as a broker, dealer or principal in connection with the acquisition by
the Partnership of money-market type investments or financial futures.
<PAGE>
An affiliate of the Managing General Partner provided certain property
management services for the Port Jersey Warehouse/Distribution Center, under a
management agreement dated as of January 12, 1988, as amended. At three of this
property's eight buildings, the fee was equal to 3% of the rents actually
collected from tenants at these buildings, and at the remaining buildings the
fee was equal to 1% of the rents actually collected. Upon the sale of seven of
the eight buildings at this property, such agreement was terminated and a new
management agreement was entered into covering The Macy's Building for a fee
equal to 1% of the rents actually collected. Upon the sale of The Macy's
Building on January 30, 1996, such agreement was terminated.
The relationships of the Managing General Partner (and its directors and
officers), the Associate General Partner and certain of their affiliates are
described in Item 10 above and Item 12 below, which descriptions are
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person is known to the Partnership to be the beneficial owner of more
than five percent of the Units.
(b) The officers and directors of the Managing General Partner as a group own
the following Units as of January 31, 1997:
Amount and Nature
Title of Name of of Beneficial Percent
Class Beneficial Owner Ownership of Class
Depositary Thomas J. Brown* Directly - 6 Units .0019
Units
Jack A. Cuneo Directly - 5 Units .0017
Directors and Directly - 11 Units .0036
Officers of
Managing General
Partner, as a group*
* Mr. Brown was a Director and officer of the Managing General Partner until
January 31, 1997.
The Amended and Restated Agreement of Limited Partnership of the
Partnership provides that all cash distributions and allocations of income and
loss to the General Partners be distributed or allocated, as the case may be,
50% to the Managing General Partner and 50% to the Associate General Partner.
The General Partners' share of cash distributions and income and loss is
described in Item 5 above, which description is incorporated herein by
reference.
All of the outstanding shares of common stock of the Managing General
Partner are owned by MLH Group Inc., a Delaware corporation which is a
wholly-owned subsidiary of Hubbard. Hubbard is a wholly-owned subsidiary of
Merrill Lynch Group, Inc., a Delaware corporation, which is in turn a
wholly-owned subsidiary of ML&Co. ML&Co. is also the parent company of MLPF&S,
the selling agent of the Units. The general partner of the Associate General
Partner is a wholly-owned subsidiary of the Managing General Partner, and the
limited partner of the Associate General Partner is a wholly-owned subsidiary of
Hubbard.
Additional information with respect to the directors and executive officers
of the Managing General Partner is contained in Item 10 above, which information
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Annual Report:
Financial Statements (See Index to Consolidated Financial Statements filed
as part of Item 8 of this Annual Report).
Financial Statement Schedules (See Index to Consolidated Financial
Statements filed as part of Item 8 of this Annual Report).
Exhibits
(2) Not Applicable
(3) Amended and Restated Agreement of Limited Partnership dated as of
March 5, 1986 set forth in Exhibit A to the Prospectus is incorporated
herein by reference.
(4) Reference is made to Exhibit (3) hereto.
(9) Not applicable
(10) (a) The following documents are incorporated herein by reference to
Exhibits 1 through 6, inclusive, to the Partnership's Current Report
on Form 8-K dated August 15, 1989.
(i) Amended and Restated Agreement of General Partnership of
Treasure Island Associates dated July 31, 1989 between MLH Income
Realty Partnership VI and the Loren Realty Investment Company, Inc.
(ii) Partial Amendment and Complete Restatement of Agreement for
Exchange of Real Property and Joint Escrow Instructions among
Hix-Rubenstein Partnership, Treasure Island Park and Treasure Island
Trailer Park dated as of February 24, 1989.
(iii) Property Purchase Agreement Assignment dated as of August
1, 1989 among Treasure Island Trailer Park, Hix-Rubenstein
Partnership, Treasure Island Park and Treasure Island Associates.
(iv) Assignment of Agreement for Exchange of Real Property and
Joint Escrow Instructions dated as of July 31, 1989 among Treasure
Island Trailer Park, Treasure Island Associates, Hix-Rubenstein
Partnership, The First American Financial Corporation and Treasure
Island Park
(v) Agreement of Sale and Assignment and Escrow Instructions
dated as of August 1, 1989 between Hix-Rubenstein Partnership and
Treasure Island Associates.
(vi) Property Management Agreement dated as of August 1, 1989
between Treasure Island Associates and Richard A. Hall d/b/a Equity
Management Group.
(10) (b) Agreement of Purchase and Sale between the Partnership and Sunrise
Terrace Mobilehome Owners Association, as amended, is incorporated
herein by reference to Exhibit 1 to the Partnership's Current Report
on Form 8-K dated April 3, 1995.
(10) (c) The following exhibits are incorporated herein by reference to
Exhibits 1 and 2 to the Partnership's Quarterly Report on Form 10-Q
for the quarter ended May 31, 1995:
(i) Agreement of Purchase and Sale between the Partnership and
Keystone-New Jersey property Holding Corp.
(ii) Property Management Agreement between the Partnership and
MLH Management Corp.
(10) (d) Agreement of Purchase and Sale and Joint Escrow Instructions
between California Community Centers Associates and AMB Retail Income
Fund, Inc. is incorporated herein by reference to Exhibit 1 to the
Partnership's Current Report on Form 8-K dated October 11, 1995.
(10) (e) Agreement of Purchase and Sale between American Retirement
Communities Partnership and Aubrey Meyerson Company, as amended and
assigned, is incorporated herein by reference to Exhibit 1 to the
Partnership's Current Report on Form 8-K dated December 13, 1995.
<PAGE>
(10) (f) Agreement of Purchase and Sale and Joint Escrow Instructions
between California Community Centers Associates and M&H Realty
Partners III L.P., as amended, is incorporated herein by reference to
Exhibit 1 to the Partnership's Current Report on Form 8-K dated
February 1996.
(10) (g) Agreement of Purchase and Sale between the Partnership and
Keystone-New Jersey Property Holding Corp., is incorporated herein by
reference to Exhibit 2 to the Partnership's Current Report on Form 8-K
dated February 6, 1996.
(10) (h) Agreement of Purchase and Sale between the Partnership and Runise
Corporation, is incorporated herein by reference to Exhibit 1 to the
Partnership's Current Report on Form 8-K dated March 19, 1996.
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(16) Not Applicable
(18) Not Applicable
(21) List of Subsidiaries of the Partnership. A copy of such List is filed
with this Annual Report.
(22) Not Applicable
(23) Not Applicable
(24) Not Applicable
(27) Article 6 Financial Data Summary for the year ended December 31, 1997
10-K. A copy of such Summary is filed with this Annual Report.
(28) Not Applicable
<PAGE>
<TABLE>
<S> <C> <C>
(99) (a) Supplement dated February 13, 1987 to Prospectus of the
Partnership dated March 5, 1986, filed pursuant to Rule 424(b), is
incorporated herein by reference.
(b) The following Current Reports of the Partnership on Form 8-K are incorporated
herein by reference.
(i) The Partnership's Current Report on Form 8-K dated August 15, 1989.
(ii) The Partnership's Current Report on Form 8-K dated November 5, 1990.
(iii)The Partnership's Current Report on Form 8-K dated January 29, 1991.
(iv) The Partnership's Current Report on From 8-K dated March 15, 1993.
(v) The Partnership's Current Report on Form 8-K dated July 1, 1994.
(vi) The Partnership's Current Report on Form 8-K dated July 13, 1994.
(vii) The Partnership's Current Report on Form 8-K dated August 12, 1994.
(viii)The Partnership's Current Report on Form 8-K dated September 1, 1994.
(ix The Partnership's Current Report on Form 8-K dated September 12, 1994.
(x) The Partnership's Current Report on Form 8-K dated October 13, 1994.
(xi) The Partnership's Current Report on Form 8-K dated April 3, 1995.
(xii) The Partnership's Current Report on Form 8-K dated October 11, 1995.
(xiii)The Partnership's Current Report on Form 8-K dated December 13, 1995.
(xiv)The Partnership's Current Report on Form 8-K dated December 28, 1995.
(xv)The Partnership's Current Report on Form 8-K dated February 6, 1996.
(xvi)The Partnership's Current Report on Form 8-K dated March 19, 1996.
(99) (c) Item 5 of Part II of the Partnership's Quarterly Report on
Form 10-Q for the quarter ended August 31, 1995 is incorporated
herein by reference.
(b) No Reports on Form 8-K were filed during the last quarter of the
fiscal period covered by this Annual Report.
</TABLE>
<PAGE>
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.
MLH INCOME REALTY PARTNERSHIP VI
By: MLH Property Managers Inc.
Managing General Partner
Date: March 31, 1998 By: /s/Jack A. Cuneo
Jack A. Cuneo
President, Chief Executive Officer,
Chairman and Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 31, 1998 /s/Jack A. Cuneo
Jack A. Cuneo
Director of Managing General Partner
Date: March 31, 1998 /s/ Robert F. Aufenanger
Robert F. Aufenanger
Director of Managing General Partner
Date: March 31, 1998 /s/James V. Caruso
James V. Caruso
Director of Managing General Partner
<PAGE>
EXHIBIT 21
----------
Subsidiaries of the Partnership
-------------------------------
MLH Property Managers Inc., a Delaware corporation, which is the
Partnership's Managing General Partner.
MLH Realprop Associates VI L.P., a New York limited partnership, which is
the Partnership's Associate General Partner.
MLHIR VI Incorporated, a Delaware corporation, which is the general partner
of the Partnership's Associate General Partner.
MLHIR VI Assignor Inc., a Delaware corporation, which is the Assignor
Limited Partner and a wholly-owned subsidiary of the Managing General Partner.
Treasure Island Associates, a California general partnership, of which the
Partnership is a general partner.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary information extracted from the fourth
quarter of 1997 Form 10-K Balance Sheets and Statements of Operations and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 27,728,694
<INVESTMENTS-AT-VALUE> 26,715,816
<RECEIVABLES> 677,565
<ASSETS-OTHER> 7,695,779
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 40,915,186
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 879,704
<TOTAL-LIABILITIES> 879,704
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
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<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,012,878)
<NET-ASSETS> 39,902,308
<DIVIDEND-INCOME> 119,259
<INTEREST-INCOME> 285,719
<OTHER-INCOME> 26,509
<EXPENSES-NET> 1,871,516
<NET-INVESTMENT-INCOME> (726,329)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> (726,329)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (726,329)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
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<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 41,209,416
<PER-SHARE-NAV-BEGIN> 126.59
<PER-SHARE-NII> (2.25)
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
