UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
For Quarter Ended Commission File Number
September 30, 1999 0-15532
MLH INCOME REALTY PARTNERSHIP VI
(Exact name of registrant as specified in its governing instrument)
New York 13-3272339
(State of Organization) (I.R.S. Employer Identification No.)
World Financial Center, South Tower
225 Liberty Street, New York, New York 10080-6112
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (800) 288-3694.
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 __.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets
September 30, 1999 and December 31, 1998.
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 1999 and 1998
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1999 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
<PAGE>
<TABLE>
<CAPTION>
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS:
REAL ESTATE INVESTMENTS HELD FOR SALE (Note 2):
Land $ - $ 26,716
Other real estate assets - 8,617
------------- ------------
Total real estate investments - 35,333
------------- ------------
OTHER ASSETS:
Cash and equivalents (Note 1) 42,150 4,749
Interest and other receivables, net 170 122
Prepaid expenses and other 10 4
------------- ------------
Total other assets 42,330 4,875
------------- ------------
TOTAL $ 42,330 $ 40,208
============= ============
LIABILITIES:
Accounts payable and accrued expenses $ 404 $ 161
Other liabilities - 514
------------- ------------
Total liabilities 404 675
------------- ------------
PARTNERS' CAPITAL:
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 106,239 103,846
Cumulative distributions (359,281) (359,281)
------------- ------------
41,926 39,533
------------- ------------
Total Partners' capital 41,926 39,533
------------- ------------
TOTAL $ 42,330 $ 40,208
============= ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Unit Data)
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Rental and management fees $ 73 $ 169 $ 424 $ 328
Interest 224 66 331 227
Gain on sale of real estate investment (Note 2) 2,381 - 2,381 -
------------ ------------ ------------ ------------
Total operating revenues 2,678 235 3,136 555
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Property operating 112 229 501 868
General and administrative 83 83 242 218
------------ ------------ ------------ ------------
Total operating expenses 195 312 743 1,086
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 2,483 $ (77) $ 2,393 $ (531)
============ ============ ============ ============
NET INCOME (LOSS) ALLOCATED TO
LIMITED PARTNERS $ 2,483 $ (77) $ 2,393 $ (531)
============ ============ ============ ============
NET INCOME (LOSS) PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 7.71 $ (0.24) $ 7.43 $ (1.64)
============ ============ ============ ============
UNITS OF LIMITED PARTNERSHIP INTEREST 322,275 322,275 322,275 322,275
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
For the Nine Months Ended
September 30,
---------------------------------------
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 2,393 $ (531)
Items reconciling net income (loss) to net cash
provided by(used in)operating activities:
Gain on the sale of real estate investment (Note 2) (2,381) -
Bad debt expense - (16)
Changes in operating assets and liabilities:
Interest and other receivables (48) (186)
Accounts payable and accrued expenses 230 (138)
Other assets and other liabilities, net (20) (2)
------------ -----------
Net cash provided by (used in) operating activities 174 (873)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of real estate investment, net
of selling expenses (Note 2) 37,808 -
Property improvements (581) (907)
------------ -----------
Net cash provided by (used in) investing activities 37,227 (907)
------------ -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 37,401 (1,780)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 4,749 6,434
------------ -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 42,150 $ 4,654
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MLH INCOME REALTY PARTNERSHIP VI
AND CONSOLIDATED JOINT VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. PARTNERSHIP DISSOLUTION SIGNIFICANT ACCOUNTING POLICIES
MLH Income Realty Partnership VI (the "Partnership") sold its last real
property investment on August 31, 1999 and thereby dissolved in accordance with
Article 8 Section 8.1 (ii) of the Partnership's Amended and Restated Agreement
of Limited Partnership (the "Partnership Agreement"). The Partnership will not
be terminated until, among other things, its assets have been distributed. The
Partnership expects that net proceeds from the sale of the property together
with all other Partnership's funds, if any, will be distributed to Unit holders
in December 1999, after settlement of remaining operating assets and liabilities
and deductions to provide for expenses and wind-down costs of the Partnership.
The final distribution is currently estimated to be approximately $129 per
Depository Unit and is subject to change. After this final distribution, the
Partnership will be terminated.
Organization
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 following is a summary of significant accounting policies followed by
the Partnership in the preparation of its consolidated financial statements:
Basis of Presentation
The financial statements reflect all adjustments which are, in the opinion
of management, necessary for a fair presentation of the financial condition and
results of operations for the periods presented. Such adjustments were of a
normal, recurring nature. Footnote disclosure which substantially duplicates the
disclosure contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1998, which is hereby incorporated by reference, has
been omitted.
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 nine months ended September 30, 1999 and 1998 are
immaterial.
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 Agreement.
Under the terms of the Partnership Agreement, the General Partner will not
retain any of the sale proceeds resulting from the August 31, 1999 sale of the
property. In addition, the General Partners are required to make additional
capital contributions in accordance with the deficit restoration provision of
the Partnership Agreement.
2. Sale of Real Estate Investment
On August 31, 1999, Treasure Island Associates ("TIA"), a joint venture
between the Partnership and an unaffiliated entity, sold Treasure Island (the
"property") located in Laguna Beach, California. The sale price was
approximately $37,922,000 and TIA incurred closing and other costs of
approximately $114,000 in connection with the sale. All net proceeds from the
sale of the property were distributed to the Partnership. In 1992, 1994 and
1995, the Partnership had recorded provisions for loss on impairment of the
property totalling $18,559,000 which were adjusted as of the August 31, 1999
sale date to the final loss amount. As a result, the Partnership recorded a gain
as of the August 31, 1999 sale date of $2,381,000 for financial reporting
purposes.
<PAGE>
The Partnership expects to distribute the net sale proceeds, approximately
$117 per Depository Unit, as part of a final distribution to the Limited
Partners in December 1999, in accordance with the terms of the Partnership
Agreement. Buyers and sellers of Depository units will receive the distribution
in accordance with the terms of the Partnership's transfer documents.
3. LITIGATION
TREASURE ISLAND ASSOCIATES LITIGATION
The Partnership owned a joint venture Partnership interest in the property
formerly known as Treasure Island (the "property"), which was 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.
On May 2, 1996, George Posey, a nonresident tenant, filed an action with
the Court against TIA claiming that TIA wrongfully sold his mobilehome at a
warehouseman's lien sale. This action was settled in August 1999.
On July 6, 1998, Eugene R. Atherton, M.D. filed a Petition for Writ of
Mandate (the "Petition") in the Orange County Superior Court against the City
Council Members and others (Atherton v. City of Laguna Beach, et al., Action No.
796478). The Petition challenged the City's compliance with the California
Environmental Quality Act in its consideration of the Plan and sought a Writ of
Mandate vacating the City Council's approval of the Plan. Since TIA has sold the
property, TIA is no longer a party in interest.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
MLH Income Realty Partnership VI (the "Partnership") sold, through a joint
venture partnership with an unaffiliated entity, its last investment property on
August 31, 1999, and, thereby, dissolved in accordance with Article 8 Section
8.1 (ii) of the Partnership's Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement")
At September 30, 1999, the Partnership and its consolidated joint venture
had cash and equivalents of approximately $42.1 million. Such funds are expected
to be utilized for a final cash distribution to the Limited Partners. In total,
cash and equivalents increased approximately $37.4 million from December 31,
1998 to September 30, 1999 primarily due to the receipt of proceeds from the
August 31, 1999 sale of the Partnership's last investment property and interest
income earned on the Partnership's portfolio of cash equivalents.
Cash flows were affected by disbursements for the redevelopment of the
property.
Cumulative Limited Partners' distributions paid through November 30, 1996
have been allocated to the Limited Partners based upon the dates they became
Unit Holders and are summarized as follows:
<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.
<PAGE>
Considering reserve requirements for liabilities and wind-down costs, the
Partnership's final distribution of approximately $129 per Depository Unit, to
the Limited Partners will be made in December 1999 in accordance with the
Partnership Agreement. The final distribution is currently estimated to be
approximately $129 per Depository Unit and is subject to change. Buyers and
sellers of Units will receive such distributions in accordance with the terms of
the Partnership's transfer documents.
Results of Operations
Fluctuations in the Partnership's operating results for the nine months
ended September 30, 1999, as compared to the nine months ended September 30,
1998, are primarily attributable to a decrease in total operating expenses as a
result of declined activities at the Partnership's last property.
On August 31, 1999, Treasure Island Associates ("TIA"), a joint venture
between the Partnership and an unaffiliated entity, sold Treasure Island (the
"property") located in Laguna Beach, California. The sale price was
approximately $37,922,000 and TIA incurred closing and other costs of
approximately $114,000 in connection with the sale. All net proceeds from the
sale of the property were distributed to the Partnership. In 1992, 1994 and
1995, the Partnership recorded provisions for loss on impairment of the property
totalling $18,559,000. A gain of $2,381,000 was recognized in 1999 to adjust the
provision to the final loss amount.
Year 2000 Compliance Initiative
The year 2000 ("Y2K") problem is the result of a widespread programming
technique that causes computer systems to identify a date based on the last two
numbers of a year, with the assumption that the first two numbers of the year
are "19". As a result, the year 2000 would be stored as "00", causing computers
to incorrectly interpret the year as 1900. Left uncorrected, the Y2K problem may
cause information technology systems (e.g., computer databases) and
non-information technology systems (e.g., elevators) to produce incorrect data
or cease operating completely.
The Managing General Partner is responsible for providing administrative
and accounting services necessary to support the Partnership's operations,
including maintenance of the books and records, maintenance of the partner
database, issuance of financial reports and tax information to partners and
processing distribution payments to partners. In 1995, Merrill Lynch established
the Year 2000 Compliance Initiative, which is an enterprisewide effort to
address the risks associated with the Y2K problem, both internal and external.
The Partnership utilizes systems provided by Merrill Lynch and these systems
have completed Y2K renovation and testing. Merrill Lynch continues to survey and
communicate with third parties whose Year 2000 readiness is important to the
company. Also, Merrill Lynch has participated in and continues to participate in
numerous industry tests throughout the world.
Although the Partnership has not finally determined the cost associated
with its Year 2000 readiness efforts, the Partnership does not anticipate the
cost of the Y2K problem to be material to its business, financial condition or
results of operations. However, there can be no guarantee that the systems of
other companies on which the Partnership's systems rely will be timely
converted, or that a failure to convert by another company or a conversion that
is incompatible with the Partnership's systems would not have a material adverse
effect on the Partnership's business, financial condition or results of
operations.
<PAGE>
PART II
Item 1. Legal Proceedings
TREASURE ISLAND ASSOCIATES LITIGATION
The Partnership owned a joint venture Partnership interest in the property
formerly known as Treasure Island (the "property"), which was 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.
On May 2, 1996, George Posey, a nonresident tenant, filed an action with
the Court against TIA claiming that TIA wrongfully sold his mobilehome at a
warehouseman's lien sale. This action was settled in August 1999.
On July 6, 1998, Eugene R. Atherton, M.D. filed a Petition for Writ of
Mandate (the "Petition") in the Orange County Superior Court against the City
Council Members and others (Atherton v. City of Laguna Beach, et al., Action No.
796478). The Petition challenged the City's compliance with the California
Environmental Quality Act in its consideration of the Plan and sought a Writ of
Mandate vacating the City Council's approval of the Plan. Since TIA has sold the
property, TIA is no longer a party in interest.
Items 2-5 are herewith omitted as the response to all items is either none
or not applicable.
Item 6. Exhibits and Reports on Form 8-K
Responses:
a) Exhibits: Exhibit 27 Financial Data Schedule
For the period ending September 30, 1999.
b) Reports on Form 8-K:
Report filed on July 30, 1999 disclosing under Item 5, Other Events, the
execution of a second amendment to the contract of sale of the land formerly
known as Treasure Island.
Report filed on August 26, 1999 disclosing under Item 5, Other Events, the
execution of an assignment by the buyer of the contract of sale of the land
formerly known as Treasure Island.
Report filed on September 15, 1999 disclosing (i) under Item 5, Other
Events, the sale of the land formerly known as Treasure Island, and (ii) the
resulting dissolution of the Partnership.
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership 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
By: /s/ Sharon McKenzie
--------------------------
Sharon McKenzie
Vice President and
Chief Financial Officer
November __, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary information extracted from the third quarter
of 1999 Form 10-Q Balance Sheets and Statements of Operations and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 170
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,330
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 404
<TOTAL-LIABILITIES> 404
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 41,926
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 331
<OTHER-INCOME> 424
<EXPENSES-NET> 743
<NET-INVESTMENT-INCOME> 2,393
<REALIZED-GAINS-CURRENT> 2,381
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<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> 2,393
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 40,730
<PER-SHARE-NAV-BEGIN> 122.67
<PER-SHARE-NII> 7.43
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 130.10
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
