Resource Real Estate Investors 6 LP - FORM 10-Q

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - Resource Real Estate Investors 6 LP	exh31_1.htm
EX-32.1 - EXHIBIT 32.1 - Resource Real Estate Investors 6 LP	exh32_1.htm
EX-32.2 - EXHIBIT 32.2 - Resource Real Estate Investors 6 LP	exh32_2.htm
EX-31.2 - EXHIBIT 31.2 - Resource Real Estate Investors 6 LP	exh31_2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 333-149881

RESOURCE REAL ESTATE INVESTORS 6, L.P.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		37-1548084
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
One Crescent Drive, Suite 203
Navy Yard Corporate Center
Philadelphia, PA 19112
(Address of principal executive offices) (Zip code)

(215) 546-5005
(Registrant's telephone number, including area code)

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes x No

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P.

INDEX TO QUARTERLY REPORT

ON FORM 10-Q

		PAGE
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements
	Consolidated Balance Sheets – September 30, 2009 (unaudited) and December 31, 2008	3

	Consolidated Statements of Operations Three and Nine Months Ended September 30, 2009 and 2008 (unaudited)	4

	Consolidated Statement of Changes in Partners’ Capital Nine Months Ended September 30, 2009 (unaudited)	5

	Consolidated Statements of Cash Flows Nine Months Ended September 30, 2009 and 2008 (unaudited)	6

	Notes to Consolidated Financial Statements – September 30, 2009 (unaudited)	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	22

ITEM 4.	Controls and Procedures	22

PART II	OTHER INFORMATION

ITEM 6.	Exhibits	23

SIGNATURES		24

(Back to Index)

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RESOURCE REAL ESTATE INVESTORS 6, L.P.

CONSOLIDATED BALANCE SHEETS

(in thousands)

	September 30,			December 31,
	2009			2008
	(unaudited)
ASSETS
Rental property, at cost:
Land	$	7,430		$	7,430
Buildings and improvements		56,996			55,650
Personal property		1,568			818
Construction-in-progress		559			540
		66,553			64,438
Accumulated depreciation and amortization		(5,489	)		(3,594	)
		61,064			60,844

Cash		4,564			8,227
Restricted cash		1,054			1,461
Tenant receivables, net		29			49
Insurance proceeds receivable		−			100
Loans held for investment, net		894			2,592
Prepaid expenses and other assets		294			216
Deferred financing costs, net		1,792			1,954
	$	69,691		$	75,443

LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Mortgage notes payable	$	45,274		$	45,274
Accounts payable and accrued expenses		1,247			1,744
Accrued interest expense		195			202
Payables to related parties		1,078			622
Prepaid rent		117			191
Security deposits		136			104
Total liabilities		48,047			48,137

Partners’ capital		21,644			27,306
Total liabilities and partners’ capital	$	69,691		$	75,443

The accompanying notes are an integral part of these consolidated financial statements.

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit data)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Revenues:
Rental income	$	1,946		$	1,916		$	5,663		$	5,259
Interest income from loans held for investment		111			86			256			255
		2,057			2,002			5,919			5,514
Expenses:
Rental operating		1,133			1,166			3,369			2,764
Management fees – related parties		197			180			588			514
General and administrative		176			93			524			315
Provision for loan loss		1,690			−			1,786			−
Depreciation and amortization		619			960			1,895			2,669
Total expenses		3,815			2,399			8,162			6,262
Loss before interest expense, net		(1,758	)		(397	)		(2,243	)		(748	)
Interest expense, net:
Interest expense, net		(647	)		(651	)		(1,909	)		(1,745	)
Net loss	$	(2,405	)	$	(1,048	)	$	(4,152	)	$	(2,493	)

Weighted average limited partner units outstanding		3,712			3,656			3,713			2,792

Net loss per weighted average limited partner unit	$	(0.65	)	$	(0.29	)	$	(1.12	)	$	(0.89	)

The accompanying notes are an integral part of these consolidated financial statements.

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P.

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

(in thousands, except units)

(unaudited)

	General Partner		Limited Partners						Total
	Amount		Units			Amount			Amount
Balance at January 1, 2009	$	1		3,713,492		$	27,305		$	27,306
Distributions		−		−			(1,495	)		(1,495	)
Redemption, net		−		(1,750	)		(15	)		(15	)
Net loss		−		−			(4,152	)		(4,152	)
Balance at September 30, 2009	$	1		3,711,742		$	21,643		$	21,644

The accompanying notes are an integral part of this consolidated financial statement.

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	For the Nine Months Ended
	September 30,
	2009			2008
Cash flows from operating activities:
Net loss	$	(4,152	)	$	(2,493	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		1,895			2,669
Amortization of deferred financing costs		162			150
Accretion of discount and direct loan fees and costs, net of cash collected		(88	)		(16	)
Provision for loan loss		1,786			−
Changes in operating assets and liabilities:
Restricted cash		407			(506	)
Tenant receivables, net		20			9
Receivable from related party		−			(15	)
Prepaid expense and other assets		(78	)		113
Insurance proceeds receivable		100			−
Accounts payable and accrued expenses		(497	)		1,165
Payables to related parties		456			(637	)
Accrued interest expense		(7	)		195
Prepaid rent		(74	)		33
Security deposits		32			(21	)
Net cash (used in) provided by operating activities		(38	)		646

Cash flows from investing activities:
Property acquisitions		−			(13,272	)
Capital expenditures		(2,115	)		(1,596	)
Net cash used in investing activities		(2,115	)		(14,868	)

Cash flows from financing activities:
Advance from related party		−			541
Capital contributions		−			25,484
Offering costs		−			(2,991	)
Redemption, net		(15	)		−
Distributions to limited partners		(1,495	)		(980	)
Net cash (used in) provided by financing activities		(1,510	)		22,054

(Decrease) increase in cash		(3,663	)		7,832
Cash at beginning of period		8,227			1,460
Cash at end of period	$	4,564		$	9,292

The accompanying notes are an integral part of these consolidated financial statements.

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

(unaudited)

NOTE 1 – NATURE OF BUSINESS AND OPERATIONS

Resource Real Estate Investors 6, L.P. (“R-6” or the “Partnership”) is a Delaware limited partnership which owns and operates or invests in multifamily residential properties located in Maine and Texas. The Partnership also invests in subordinated notes secured by multifamily residential properties located in California, Alabama and Nevada. R-6 was formed on July 26, 2007 and commenced operations on October 1, 2007. The Partnership was capitalized by an offering of partnership interests which was closed on May 19, 2008. The General Partner, Resource Capital Partners, Inc. (“RCP” or the “GP”), is in the business of sponsoring and managing real estate investment limited partnerships and tenant in common programs. RCP contributed $1,000 in cash as its minimum capital contribution to the Partnership. In addition, RCP holds a 5.0% limited partnership interest in the Partnership at both September 30, 2009 and December 31, 2008. RCP is an indirect wholly owned subsidiary of Resource America, Inc. (“RAI”), a publicly traded company (NASDAQ: REXI) operating in the real estate, financial fund management and commercial finance sectors.

The Partnership will continue until July 30, 2015, unless terminated earlier in accordance with the First Amended and Restated Agreement of Limited Partnership (the “Agreement”). The GP has the right to extend the Partnership term for two one-year periods following the initial termination date, provided that all such extensions may not exceed two years in the aggregate.

The Agreement provides that income is allocated as follows: first, to the partners in proportion to and to the extent of the deficit balances, if any, in their respective capital accounts; second, to the partners in proportion to the allocations of Distributable Cash (as defined in the Agreement); and third, 100% to the limited partners (“LPs”). All losses are allocated as follows: first, 100% to the LPs until the LPs have been allocated losses equal to the excess, if any, of their aggregate capital account balances over their aggregate Adjusted Capital Contributions (as defined in the Agreement); second, to the partners in proportion to and to the extent of their respective remaining positive capital account balances, if any; and third, 100% to the LPs.

Distributable cash from operations, payable monthly, as determined by the GP, is first allocated 100% to the LPs until the LPs have received their Preferred Return (as defined in the Agreement); thereafter, 80% to the LPs and 20% to the GP. The Preferred Return is generally an annual return on adjusted capital contributions of 8.25% for 2007 investors and 8.0% for 2008 investors.

Distributable cash from capital transactions, as determined by the GP, is first allocated 100% to the LPs until the LPs have received their Preferred Return; second, 100% to the LP’s until their Adjusted Capital Contributions have been reduced to zero; and thereafter, 80% to the LPs and 20% to the GP.

The consolidated financial statements and the information and tables contained in the notes thereto as of September 30, 2009 and for the three and nine months ended September 30, 2009 and 2008 are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, in the opinion of management, these interim financial statements include all the necessary adjustments to fairly present the results of the interim periods presented. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Partnership’s Registration Statement on Form 10 for the year ended December 31, 2008. The results of operations for the three and nine months ended September 30, 2009 may not necessarily be indicative of the results of operations for the full year ending December 31, 2009.

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2009

(unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Partnership and its wholly owned subsidiaries, as follows:

Subsidiary	Apartment Complex	Number of Units		Location
RRE Memorial Towers Holdings, LLC (“Memorial Towers”)	Memorial Towers		112	Houston, Texas
RRE Villas Holdings, LLC (“Villas”)	Villas at Henderson Pass		228	San Antonio, Texas
RRE Coach Lantern Holdings, LLC (“Coach Lantern”)	Coach Lantern		90	Scarborough, Maine
RRE Foxcroft Holdings, LLC (“Foxcroft”)	Foxcroft		104	Scarborough, Maine
RRE Park Hill Holdings, LLC (“Park Hill”)	Park Hill		288	San Antonio, Texas

The Partnership owns a 100% interest in RRE Funding II, LLC (“Funding”), which owns three mezzanine notes with a combined face value of $2.9 million.

All material intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Partnership estimates the allowance for uncollectible receivables and loan losses and adjusts the balances quarterly. Actual results could differ from those estimates.

Supplemental Disclosure of Cash Flow Information

During the nine months ended September 30, 2009 and 2008, the Partnership paid $1.8 million and $1.5 million, respectively, in cash for interest. See Note 3 for additional supplemental cash flow information.

Deferred Financing Costs

Costs incurred to obtain financing have been capitalized and are being amortized over the term of the related debt using the effective yield method.

Income Taxes

Income taxes or credits resulting from earnings or losses are payable by or accrue to the benefit of the partners; accordingly, no provision has been made for income taxes in these consolidated financial statements.

Revenue Recognition

Revenue is primarily derived from the rental of residential housing units with lease agreement terms of approximately twelve months. The Partnership recognizes revenue in the period that rent is earned, which is on a monthly basis.

Rents are recognized as income on a straight-line basis over the term of the lease for leases with varying rental payments. Any incentives included in the lease are amortized on a straight-line basis over the term of the lease.

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2009

(unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)

Loans Held for Investment, Net

The Partnership recognizes revenue from the loans it holds for investment as interest income using the effective yield method.

The initial investment made in a purchased loan includes the amount paid to the seller plus any fees. The initial investment frequently differs from the related loan’s principal amount at the date of purchase. This difference is recognized as an adjustment of the yield over the life of the loan.

The Partnership initially records its loans at their purchase price, and subsequently accounts for them based on their outstanding principal plus or minus any unamortized premiums or discounts.

Interest income on loans includes interest at stated rates adjusted for amortization or accretion of premiums and discounts. Premiums and discounts are amortized or accreted into income using the effective yield method. When the Partnership purchases a loan or pool of loans at a discount, it evaluates whether all or a portion of the discount represents accretable yield. If a loan with a premium or discount is prepaid, the Partnership immediately recognizes the unamortized portion as a decrease or increase to interest income.

The Partnership considers a loan to be impaired when, based on current information and events, management believes it is probable that the Partnership will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is impaired, the allowance for loan losses is increased by the amount of the excess of the amortized cost basis of the loan over its fair value. Fair value may be determined based on market price, if available, the fair value of the collateral less estimated disposition costs, or the present value of estimated cash flows.

The Partnership considers general and local economic conditions, neighborhood values, competitive overbuilding, casualty losses and other factors that may affect the value of loans and real estate securing those loans. The value of loans and the related real estate may also be affected by factors such as the cost of compliance with regulations and liability under applicable environmental laws, changes in interest rates and the availability of financing. Income from a property that supports a loan’s debt service requirements will be reduced if a significant number of tenants are unable to pay rent or if available space cannot be rented on favorable terms. The Partnership continuously monitors collections and payments from its borrowers and maintains an allowance for estimated losses based upon its historical experience and its knowledge of specific borrower collection issues. An impaired real estate loan may remain on accrual status during the period in which the Partnership is pursuing repayment of the loan; however, the loan will be placed on non-accrual status at such time as either (1) management believes that contractual debt service payments will not be met; (2) the loan becomes 90 days delinquent; or (3) management determines the borrower is incapable of, or has ceased efforts toward, curing the cause of the impairment. While on non-accrual status, the Partnership recognizes interest income only when an actual payment is received. If the timing and amount of expected future cash flows cannot be reasonably estimated for a loan, and collection is not probable, the cost recovery method of accounting is used. Under the cost recovery method, any amounts received are applied against the recorded amount of the loan. There is no effect on the income statement as a result of these reductions.

For the nine months ended September 30, 2009, a $1.8 million provision for loan loss was recorded and is included on the consolidated statements of operations. No such provision was deemed necessary for the nine months ended September 30, 2008. At September 30, 2009 and 2008, the allowance for loan loss was $1.7 million and $0, respectively.

Long-Lived Assets

The Partnership reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an asset’s estimated future cash flows will not be sufficient to recover its carrying amount, an impairment charge will be recorded to reduce the carrying amount for that asset to its estimated fair value. There was no impairment loss for the nine months ended September 30, 2009 and 2008, respectively.

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2009

(unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)

Rental Property

Rental property is carried at cost, net of accumulated depreciation. Buildings and improvements and personal property are depreciated for financial reporting purposes on the straight-line method over their estimated useful lives. The value of in-place leases is amortized over twelve months on a straight line basis. For income tax reporting purposes, the Partnership uses the Modified Accelerated Cost Recovery System. Useful lives used for calculating depreciation for financial reporting purposes are as follows:

	Buildings and improvements	27.5 years
	Personal property	3 - 15 years

Advertising Costs

The Partnership expenses advertising costs as they are incurred. Advertising costs, which are included in rental operating expenses, totaled $150,000 and $155,000 for the nine months ended September 30, 2009 and 2008, respectively.

Concentration of Credit Risk

Financial instruments, which potentially subject the Partnership to concentration of credit risk, consist of periodic temporary deposits of cash. At September 30, 2009, the Partnership had $4.8 million of deposits at various banks, of which $2.9 million was over the insurance limit of the Federal Deposit Insurance Corporation. No losses have been experienced on such deposits.

Tenant Receivables, net

Tenant receivables are stated in the financial statements net of an allowance for uncollectible receivables. The Partnership determines its allowance by considering a number of factors, including the length of time receivables are past due, security deposits held, previous loss history, the tenants’ current ability to pay their obligations to the Partnership, the condition of the general economy and the industry as a whole. The Partnership writes off receivables when they become uncollectible. At September 30, 2009 and December 31, 2008, $0 and $1,000, respectively is included in the allowance for uncollectible receivables.

Newly Adopted Accounting Principles

Fair Value of Financial Instruments. In April 2009, the Financial Accounting Standards Board (“FASB”) issued new accounting standard which requires an entity to provide disclosures about fair value of financial instruments in interim financial information. This guidance amended previous guidance to require those disclosures in summarized financial information for interim reporting periods. This guidance requires an entity to disclose in the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the financial statements. The new guidance is effective for interim and annual periods ended after June 15, 2009. The adoption of this guidance did not have a material impact on the Partnership’s consolidated financial statements.

Subsequent Events. In May 2009, the FASB issued guidance on subsequent events that establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. This guidance was effective for interim or annual financial periods ending after June 15, 2009. The adoption of this guidance did not have a material impact on the Partnership’s consolidated financial statements.

Codification of U.S. GAAP. In June 2009, the FASB issued a new accounting guidance, which identifies the FASB Accounting Standards Codification as the authoritative source of U.S. GAAP. Rules and interpretive releases of the SEC under federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The new guidance is effective for periods ending after September 15, 2009. The adoption of this guidance had no impact on the Partnership’s consolidated financial statements.

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2009

(unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)

Accounting Standards Issued But Not Yet Effective

Quantitatively Valuing VIEs. In April 2009, the FASB issued new guidance, which requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (“VIE”), and an ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. This guidance is effective for the Partnership beginning October 1, 2010 and will not have a material impact on its consolidated financial statements.

NOTE 3 – PROPERTY ACQUISITIONS

The cost of properties acquired was allocated to net tangible assets based on relative fair values. Fair value estimates were based on information obtained from a number of sources, including independent appraisals that were obtained in connection with the acquisition or financing of the respective property and other market data, as well as information obtained about each property as a result of due diligence, marketing and leasing activities.

The following table presents the purchase price allocation to the assets and liabilities assumed, based on the fair values at the date of acquisition (in thousands, except for dates):

	Park Hill			Coach Lantern			Foxcroft
Date acquired	02/29/08			01/29/08			01/29/08

Land and buildings	$	14,900		$	10,800		$	12,000
Acquisition costs		429			366			335
Purchase price		15,329			11,166			12,335

Mortgage notes payable		(10,430	)		(7,884	)		(8,760	)
Financing costs		564			321			416
Escrowed funds and advances		551			46			66
Other liabilities and assets assumed, net		(49	)		65			83
Cash paid for property acquisitions		5,965			3,714			4,140
Less deposits paid in the prior year		(270	)		(131	)		(146	)
Cash paid	$	5,695		$	3,583		$	3,994

Allocation of value to in-place leases	$	470		$	286		$	212

NOTE 4 − RESTRICTED CASH

Restricted cash represents escrow deposits with lenders to be used to pay real estate taxes, insurance, and capital improvements. A summary of the components of restricted cash follows (in thousands):

	Real Estate Taxes		Insurance		Capital Improvements		Total
September 30, 2009	$	602	$	48	$	403	$	1,054

December 31, 2008	$	763	$	124	$	574	$	1,461

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2009

(unaudited)

A summary of loans held for investment, net at December 31, 2008, follows (in thousands):

	Acacia			Hillwood			Southern Cove			Totals
Loan principal	$	2,000		$	400		$	500		$	2,900
Discount		(400	)		(40	)		(10	)		(450	)
Direct loan fees and costs		79			18			24			121
Accumulated amortization and accretion, net		20			2			(1	)		21
Carrying amount of loan	$	1,699		$	380		$	513		$	2,592

	Acacia			Hillwood			Southern Cove
Maturity date	08/11/16			01/08/17			05/08/17
Interest rate		10.27	%		10.97	%		12.75	%
Average monthly payment	$	17,952		$	3,799		$	5,313

All loans are interest only through maturity. In June 2009, the Acacia loan became delinquent. In October 2009, the first mortgage holder informed the Partnership that the terms of the intercreditor agreement had become effective due to the continued default by the Acacia borrower. As a result, the first mortgage holder must be repaid in full before the Partnership may recover any current or accrued interest or principal. Based on management's analysis, the Partnership placed the Acacia loan on non-accrual status and reserved the entire balance. At September 30, 2009 the other two loans were current with respect to the scheduled payments of interest. At December 31, 2008, all three loans were current.

NOTE 6 – DEFERRED FINANCING COSTS

Accumulated amortization with respect to the Partnership’s real properties as of September 30, 2009 and December 31, 2008 was $335,000 and $173,000, respectively. The amortization expense with respect to existing deferred financing costs for the next five years, and thereafter, ending September 30 is as follows (in thousands):

2010	$	226
2011		238
2012		250
2013		264
2014		277
Thereafter		537
	$	1,792

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2009

(unaudited)

NOTE 7 – MORTGAGE NOTES PAYABLE

The following is a summary of mortgage notes payable (in thousands):

						Average
				Annual		Monthly
			Maturity	Interest		Debt
Apartment Complex	Balance		Date	Rate		Service
Park Hill	$	10,430	03/01/2018		5.05%	$	44	(1)
Foxcroft		8,760	02/01/2015		4.92%		36	(2)
Coach Lantern		7,884	02/01/2015		4.92%		32	(2)
Memorial Towers		7,400	01/01/2017		5.49%		34	(3)
Villas at Henderson Pass		10,800	01/01/2017		5.48%		49	(3)
Total-	$	45,274

(1) Interest only through March 1, 2013; monthly payment will include principal and interest effective April 1, 2013.

(2) Interest only through the maturity date.

(3) Interest only through January 1, 2013; monthly payment will include principal and interest effective February 1, 2013.

Annual principal payments on the mortgage notes payable for each of the next five years, and thereafter, ending September 30, are as follows (in thousands):

2010	$	−
2011		−
2012		−
2013		189
2014		387
Thereafter		44,698
	$	45,274

The mortgage notes payable are with recourse only to the properties securing them subject to certain limited standard exceptions, as defined in the mortgage notes, which the General Partner has guaranteed (“carveouts”). These carveouts relate to the total debt and expire as the notes are paid down.

NOTE 8 – CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In the ordinary course of its business operations, the Partnership has ongoing relationships with several related entities. Payables to related parties are summarized in the following table (in thousands):

	September 30,		December 31,
	2009		2008
Payables to related parties:
RCP (a)	$	574	$	309
Resource Real Estate Management, LLC (“RREML”) (b)		458		262
Resource Real Estate Management, Inc. (“RREMI”) (c)		45		51
Other		1		−
	$	1,078	$	622

(a)	At September 30, 2009 and December 31, 2008, the LPs had not received their Preferred Return; therefore, the balance includes $570,000 and $305,000, respectively, of investment management fees, as well as $3,900 due to RCP for reimbursement of advances to cover ordinary operating expenses.

(b)	RREML is a wholly owned subsidiary of RCP. At September 30, 2009 and December 31, 2008, the balance includes accrued property management fees of $385,000 and $233,000, respectively, and accrued debt management fees of $73,000 and $29,000, respectively.

(c)	RREMI is an indirect wholly owned subsidiary of RAI which is engaged by RREML as the manager of the Partnership’s properties. During the ordinary course of business, RREMI advances funds for ordinary operating expenses on behalf of the properties; these advances are repaid within a few days.

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2009

(unaudited)

NOTE 8 – CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS – (Continued)

Payments to related parties are summarized in the following table (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2009		2008		2009		2008
RCP:
Acquisition fees (1)	$	−	$	−	$	−	$	750
Debt placement fees (1)		−		−		−		474
Organization and offering expense (2)		−		−		−		605
Investment management fees (3)		85		85		254		228
Interest expense (4)		−		−		−		50
RREML:
Property management fees (5)		97		88		280		253
Debt management fees (6)		14		14		44		44
Ledgewood P.C. (“Ledgewood”) – legal services (7)		28		−		28		60
Chadwick Securities, Inc. (“Chadwick”):
Underwriting fees (8)		−		−		−		482
Payment of commissions (9)		−		−		−		1,649
Nonaccountable marketing and due diligence expense (10)		−		−		−		241

(1)

RCP is entitled to receive a property acquisition fee equal to 1.75% of the purchase price of any property purchased by the Partnership, payable at the closing of the transaction. RCP is also entitled to receive a debt placement fee equal to 1.75% of the face amount of any financing obtained or assumed by the Partnership.

(2)	As the Partnership offered and sold its LP units, RCP was entitled to receive organization and offering expense reimbursements equal to 2.5% of the gross offering proceeds.

(3)

RCP is entitled to receive an annual investment management fee, payable monthly, equal to 1% of the gross offering proceeds, net of any LP interest owned by RCP. During the term of the Partnership, RCP must subordinate up to 100% of its annual investment management fee to the receipt by the LPs of their Preferred Return (see footnote (a) to the previous table).

(4)	During the nine months ended September 30, 2008, the Partnership borrowed $6.5 million from RCP to facilitate the purchase of two properties. The note bore interest at the prime rate and was paid in full in April 2008.

(5)	RREML is entitled to receive monthly property management fees equal to 5% of the gross operating revenues from the Partnership’s 100% owned properties, for managing or obtaining and supervising third party managers (see footnote (b) to the previous table).

(6)

RREML is also entitled to receive monthly debt management fees equal to 0.167% (2% per annum) of the gross offering proceeds that have been invested in loans held for investment. The fee is earned for monitoring the performance of the Partnership’s loans held for investment (see footnote (b) to the previous table).

(7)

Until 1996, the Chairman of RAI was of counsel to the law firm Ledgewood. In connection with the termination of his affiliation with Ledgewood and its redemption of his interest, he receives certain payments from Ledgewood. Until March 2006, a current executive of RAI was the managing member of Ledgewood. This executive remained of counsel to Ledgewood through June 2007, at which time he became Executive Vice President of RAI. In connection with his separation, this executive is entitled to receive payments from Ledgewood through 2013.

(8)	During 2008, while the Partnership was in its offering stage, Chadwick, a wholly owned subsidiary of RAI, was entitled to receive underwriting fees equal to 2% of the Gross Offering Proceeds, net of RCP’s LP interest.

(9)	Chadwick also received a 7% commission on each unit sold, except for those units sold either to RCP, or to its officers, directors or affiliates. Chadwick subsequently paid these commissions to unrelated third party broker-dealers in accordance with negotiated sales agreements.

(10)	In addition, Chadwick was entitled to receive both a 0.5% nonaccountable marketing expense fee and a 0.5% nonaccountable due diligence fee on each unit sold, except for those units sold either to RCP, or to its officers, directors, or affiliates.

(Back to Index)

RESOURCE REAL ESTATE INVESTORS 6, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

SEPTEMBER 30, 2009

(unaudited)

NOTE 9 – INSURANCE PROCEEDS

On September 13, 2008, a check valve failed causing substantial water damage to Memorial Towers. The repairs to the damaged property, totaling approximately $329,000 were expensed in the fourth quarter of 2008, net of a $100,000 partial advance from the insurance company received in February 2009. In May 2009, the insurance company issued an additional $25,000 advance. As of September 30, 2009, the Partnership is still negotiating with the insurance company on a final settlement, net of a $10,000 policy deductible.

NOTE 10 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Loans Held for Investment, Net. The fair value of the loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Mortgage Notes Payable. Rates currently available to the Partnership for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

The estimated fair values of the Partnership’s financial instruments are as follows (in thousands):

	September 30, 2009
	Carrying Amount		Fair Value
Loans Held for Investment, Net:
Acacia	$	−	$	−
Hillwood		381		334
Southern Cove		513		453
	$	894	$	787

Mortgage Notes Payable:
Memorial Towers	$	7,400	$	7,194
Villas at Henderson Pass		10,800		10,494
Foxcroft		8,760		8,257
Coach Lantern		7,884		7,460
Park Hill		10,430		9,835
	$	45,274	$	43,240

NOTE 11 – SUBSEQUENT EVENTS

The Partnership has evaluated subsequent events through the filing of this Form 10-Q on November 9, 2009, and determined there have not been any events that have occurred that would require adjustments to the unaudited consolidated financial statements.

(Back to Index)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION A RESULTS

AND OPERATIONS (unaudited)

This report contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology. Such statements are subject to the risks and uncertainties more particularly described in Item 1A, under the caption “Risk Factors,” in our Registration Statement on Form 10 for the year ended December 31, 2008. These risks and uncertainties could cause actual results to differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this report, except as may be required under applicable law.

Overview

We are a Delaware limited partnership that was formed on July 26, 2007 and commenced operations on October 1, 2007. Through our wholly owned subsidiaries, we own in fee, operate and invest in multifamily residential rental properties located in both Maine and Texas. We also own and invest, through a wholly owned subsidiary, in interests in real estate mortgages and other debt instruments that are secured, directly or indirectly, by a multifamily residential rental property or an interest in an entity that directly owns such a property; these properties are located in California, Alabama and Nevada. We refer to our property investments as our Properties, our debt investments as our Real Estate Debt Investments, and collectively refer to our Properties and Real Estate Debt Investments as our Real Estate Investments.

As of September 30, 2009, we own five multifamily residential rental properties through our 100% owned subsidiaries, as follows:

Subsidiary	Purchase Date	Leverage Ratio (1)		Number of Units		Location
RRE Memorial Towers Holdings, LLC, or Memorial Towers	12/18/07		63%		112	Houston, Texas
RRE Villas Holdings, LLC, or Villas	12/27/07		67%		228	San Antonio, Texas
RRE Coach Lantern Holdings, LLC, or Coach Lantern	01/29/08		61%		90	Scarborough, Maine
RRE Foxcroft Holdings, LLC, or Foxcroft	01/29/08		62%		104	Scarborough, Maine
RRE Park Hill Holdings, LLC, or Park Hill	02/29/08		56%		288	San Antonio, Texas
					822

(1)	Face value of mortgage divided by total property capitalization, including reserves, escrows, fees and closing costs.

(Back to Index)

The following table sets forth operating statistics about our multifamily residential rental properties:

Apartment Complex	Average Occupancy Rate (1)				Average Effective Rent per Square Foot (2)				Ratio of Operating Expense to Revenue (3)

Three Months Ended
September 30,	2009		2008		2009		2008		2009		2008
Memorial Towers		90.2%		89.6%	$	1.01	$	0.95		79%		73%
Villas at Henderson Pass		89.1%		94.1%	$	0.77	$	0.76		75%		75%
Coach Lantern		95.2%		89.3%	$	0.94	$	0.89		45%		53%
Foxcroft		95.2%		94.6%	$	0.96	$	0.97		51%		53%
Park Hill		93.6%		80.7%	$	0.73	$	0.61		91%		84%

Nine Months Ended
September 30,		2009		2008		2009		2008		2009		2008
Memorial Towers		81.9%		78.3%	$	1.04	$	1.01		78%		70%
Villas at Henderson Pass		81.0%		76.6%	$	0.80	$	0.76		79%		72%
Coach Lantern		81.6%		78.3%	$	0.88	$	0.81		39%		43%
Foxcroft		82.3%		80.5%	$	0.90	$	0.85		48%		49%
Park Hill		75.9%		65.7%	$	0.67	$	0.53		75%		68%

(1)	Number of occupied units divided by total units adjusted for any unrentable units; average calculated on a weekly basis.

(2)	Average rental revenue divided by total rentable square footage.

(3)	Includes rental operating expenses and general and administrative expenses as a percentage of rental income.

We also own three subordinated notes through our wholly owned subsidiary, RRE Funding II, LLC, or Funding, which was formed to hold title to our Real Estate Debt Investments, as follows (in thousands, except units and percentages):

Apartment complex	Face Value of Note		Carrying Value of Note		Interest Rate		Number of Units		Location
Acacia Park (“Acacia”)	$	2,000	$	−		10.27%		304	San Bernardino, California
Hillwood	$	400	$	380		10.97%		118	Montgomery, Alabama
Southern Cove	$	500	$	513		12.75%		100	Las Vegas, Nevada

Results of Operations

We generate our income from both the net revenues we receive from our Properties and from debt service payments made to us on our Real Estate Debt Investments. We also may, in the future, generate funds from the sale or refinancing of our Properties or the sale or repayment of our Real Estate Debt Investments. Because we acquired our Real Estate Investments in late 2007 and early 2008, we do not expect that we will sell or refinance our Properties or sell or receive any significant repayments of principal on our Real Estate Debt Investments for at least the next year. While ongoing economic conditions in the United States and other countries have generally affected real estate, including significant reductions in real estate values and the values of debt instruments linked to real estate, we were not materially affected in 2007 or 2008. However, in 2009 these conditions caused one of our Real Estate Debt Investments, the Acacia loan, to be placed on non-accrual status, we have established an allowance for loan loss of approximately $1.8 million, specifically allocated to the Acacia loan. Should the current recession continue or intensify, we could experience lower occupancy and lower rental revenues, higher operating costs and increased financing costs, and other of our Real Estate Debt Investments could be placed on non-accrual status or become impaired, all of which could harm our operations and financial condition and reduce the value of our Real Estate Investments and adversely affect the distributions to our limited partners..

(Back to Index)

Our operating results and cash flows from our Properties are affected by four principal factors:

●

occupancy rates,

●

property operating expenses,

●

interest rates on the related financing, and

●

capital expenditures.

The amount of rental revenues from our Properties depends upon the occupancy rate and concessions granted. Our Properties experienced an overall increase in the average occupancy rate during the nine months ended September 30, 2009 of approximately 5.9%, with an average occupancy rate of 79.6% over the nine month period. The average occupancy rate at September 30, 2009 was approximately 91.5%. During 2008, we had experienced a downward trend in the occupancy rate at one of our Properties while the rates at the other Properties remained stable. We attributed the 2008 occupancy rate decrease to the rapid increase in unemployment throughout the United States, which has affected some of our resident base. In particular, occupancy rates of our San Antonio property decreased due to significant layoffs at a nearby employer. Unemployment among our resident base will often result in higher bad debt expenses as well as tenants moving out of apartment units prior to the expiration of their lease term.

The aggressive property-level programs that have been deployed by our Properties have lead to the increase in occupancy rates experienced during the nine months ended September 30, 2009, including, in particular, our lease assurance program, our Lease Rent Optimizer, or LRO, program including rent concessions and a substantial capital improvements program. Under our lease assurance program, we are marketing our apartment units to current and potential tenants who are worried about incurring substantial lease breakage penalties if they lose their jobs. The program allows tenants who sign new or renewal leases to terminate their leases without penalty within 45 days after they provide proof of an involuntary job loss. Under our LRO program, we seek to price our rents for apartment units on a daily basis, based upon inventory in the marketplace and competitors’ pricing.

We seek to control operating expenses through our General Partner’s automated purchase order system that compares actual to budgeted expenses and requires management approval of variances, and through the use of third-party service providers to seek best available pricing.

Our existing financing is at fixed rates of interest and, accordingly, our interest cost has remained stable during the period of our ownership of the Properties. Because our existing financing extends through periods ranging from 2015 to 2018, we expect that our financing costs will remain stable during substantially all of our expected term.

Under our capital improvements program, more particularly described in “Liquidity and Capital Resources,” we expect to spend approximately $5.7 million in the next nine years for property improvements intended to increase the properties’ appeal to tenants. As we implement planned improvements to our Properties, we seek to cause our occupancy rates and our cash flow from operating activities to increase.

Our income from our Real Estate Debt Investments is derived from the interest we earn on those investments. Because the interest is payable at fixed rates, our income on these investments is not affected by changes in market rates of interest. Our income will, however, be affected by the ability of the Properties underlying our Real Estate Debt Investments to generate sufficient revenue to cover interest owed to our senior lenders and to us. In June 2009, one of our Real Estate Debt Investments, the Acacia loan, became delinquent. In October 2009, the first mortgage holder informed the Partnership that the terms of the intercreditor agreement had become effective due to the continued default by the Acacia borrower. As a result, the first mortgage holder must be repaid in full before the Partnership may receive any current or accrued interest or principal. Based on management’s analysis, the Partnership placed the Acacia loan on non-accrual status and reserved the entire balance.

(Back to Index)

The following table sets forth the unaudited results of our operations for the three months ended September 30, 2009 and 2008 (in thousands, except per unit data):

	Three Months Ended
	September 30,						Increase (Decrease)
	2009			2008			Dollars			Percent
Revenues:
Rental income	$	1,946		$	1,916		$	30			2%
Interest income from loans held for investment		111			86			25			29%
		2,057			2,002			55			3%
Expenses:
Rental operating		1,133			1,166			(33	)		(3%)
Management fees – related party		197			180			17			9%
General and administrative		176			93			83			89%
Provision for loan loss		1,690			−			1,690			100%
Depreciation and amortization		619			960			(341	)		(36%)
Total expenses		3,815			2,399			1,416			59%
Loss before interest expense, net		(1,758	)		(397	)		1,361			343%
Interest expense, net:
Interest expense, net		(647	)		(651	)		4			(1%)
Net loss	$	(2,405	)	$	(1,048	)	$	(1,357	)		129%
Weighted average limited partner units outstanding		3,712			3,656
Net loss per weighted average limited partner unit	$	(0.65	)	$	(0.29	)

Revenues – Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

We attribute the $55,000 increase in revenues principally due to an increase of 3.8% in the weighted average occupancy rate for the respective three months offset by an increase of $24,000 in concessions.

Expenses – Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

We attribute the $1.4 million increase in expenses principally due to the following:

●

a $33,000 decrease in operating expenses as a result of decreased painting and repairs and maintenance expenses at one property;

●

an $83,000 increase in general and administrative expenses due to increased professional fees at the fund level related to 1934 Act reporting requirements; and

●

a $1.7 million increase in the provision for loan loss related to fully reserving the delinquent Acacia loan; partially offset by,

●

a $341,000 decrease in depreciation and amortization due to four properties having fully amortized the value of their respective in-place leases.

(Back to Index)

The following table sets forth the unaudited results of our operations for the nine months ended September 30, 2009 and 2008 (in thousands, except per unit data):

	Nine Months Ended September 30,						Increase (Decrease)
	2009			2008			Dollars			Percent
Revenues:
Rental income	$	5,663		$	5,259		$	404			8%
Interest income from loans held for investment		256			255			1			−%
		5,919			5,514			405			7%
Expenses:
Rental operating		3,369			2,764			605			22%
Management fees – related party		588			514			74			14%
General and administrative		524			315			209			66%
Provision for loan losses		1,786			−			1,786			100%
Depreciation and amortization		1,895			2,669			(774	)		(29%)
Total expenses		8,162			6,262			1,900			30%
Loss before interest expense, net		(2,243	)		(748	)		1,495			200%
Interest expense, net:
Interest expense, net		(1,909	)		(1,745	)		164			9%
Net loss	$	(4,152	)	$	(2,493	)	$	1,659			67%
Weighted average limited partner units outstanding		3,713			2,792
Net loss per weighted average limited partner unit	$	(1.12	)	$	(0.89	)

Revenues – Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

We attribute the $404,000 increase in revenues principally due to an increase in the aggregate number of days (819) the properties were owned during the nine months ended September 30, 2009 as compared to the aggregate number of days (698) the properties were owned during the nine months ended September 30, 2008, as well as an increase of 5.9% in the weighted average occupancy rate for the respective nine month periods.

Expenses – Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

We attribute the $1.9 million increase in expenses principally due to the following:

●

a $605,000 increase in operating expenses due to an increase in the aggregate number of days (819) the properties were owned during the nine months ended September 30, 2009 as compared to the aggregate number of days (698) the properties were owned during the nine months ended September 30, 2009, the expenses increased including the following:

a $174,000 increase in real estate taxes;

a $148,000 increase in payroll;

a $121,000 increase in turnover costs;

a $104,000 increase in utility expenses; and

a $32,000 increase in repairs and maintenance

●

a $209,000 increase in general and administrative expenses primarily due to increased professional fees at the fund level related to 1934 Act reporting requirements and a $44,000 increase in hurricane clean-up costs; and

●

a $1.8 million increase in provision for loan loss related to fully reserving the delinquent Acacia loan; offset by

●

a $774,000 decrease in depreciation and amortization due to four properties having fully amortized the value of their respective in-place leases.

(Back to Index)

Liquidity and Capital Resources

During 2007 and 2008, we raised a total of $36.8 million through the issuance of limited partnership interests, including $1.8 million from our General Partner. The funds were used to purchase five properties and three subordinated notes, which completed our asset acquisition phase.

The following table sets forth our sources and uses of cash (in thousands) (unaudited):

	Nine Months Ended
	September 30,
	2009			2008
(Used in) provided by operating activities	$	(38	)	$	646
Used in investing activities		(2,115	)		(14,868	)
(Used in) provided by financing activities		(1,510	)		22,054
(Decrease) increase in cash	$	(3,663	)	$	7,832

Our liquidity needs consist principally of capital to pay the Properties’ debt service, operating expenses, capital expenditures and monthly distributions to the limited partners. Our ability to meet our liquidity needs will be subject to our ability to generate cash from operations and the control of property operating expenses as previously discussed. The ability to generate cash from operations will depend on the occupancy rates, rental rates charged to tenants compared with competing properties in the area and the ability of tenants to pay rent. Occupancy rates can fluctuate based on changes in local market conditions where the Properties are located such as: excessive building resulting in an oversupply of similar properties, deterioration of surrounding areas or a decrease in market rates. The rental rates charged to tenants compared to competing properties can be affected by a lack of perceived safety, convenience and attractiveness of a property. All property budgets are under review with the following goals: maximize occupancy, minimize operating costs, and minimize capital expenditures.

During the nine months ended September 30, 2009, some of our Properties incurred certain onetime expenses, which we do not expect to occur in the future. During late 2008 and early 2009, Park Hill experienced a decline in occupancy due primarily to the effects of the economy. A large number of residents worked for a government sub-contractor whose contracts were cancelled; as a result many residents terminated their leases and vacated the premises. The high volume of move-outs focused our efforts to quickly release the property and increase occupancy. During this period, we spent approximately $172,000 in excess of normal stabilized operating costs to accomplish that goal. Park Hill’s average occupancy for the current quarter was 93.6%. The property is now stabilized which we expect will prevent future dips in occupancy.

Also, during 2009, we had a major pipe replacement project at one of our Houston, Texas property. This massive project spiked the electricity usage at the property, causing the electricity expense to increase $104,000. The project has now been completed.

In addition, significant transition costs were incurred after acquisition. These non-recurring costs have been treated as operating expenses in the consolidated financial statements.

The following table sets forth the capital expenditures incurred during the nine months ended September 30, 2009 and estimated future capital expenditures which are discretionary in nature (in thousands) (unaudited):

Apartments	Capital Expenditures		Future Discretionary Capital Expenditures
Memorial Towers	$	682	$	947
Villas		265		1,342
Coach Lantern		329		783
Foxcroft		279		804
Park Hill		560		1,839
Total	$	2,115	$	5,715

We have spent $2.1 million on capital expenditures, such as club house and parking lot improvements, fixture upgrades, saltwater conversion of pools, and turn over costs during the nine months ended September 30, 2009. Future discretionary capital expenditures over the remaining life of the partnership will come from both the cash reserves established when the properties were purchased and future operating cash flows. These future expenditures are reviewed periodically and adjusted based on both operating results and market conditions. In light of the current economic environment, estimated future capital expenditures have been revised downwards. The cash reserves were $3.1 million at September 30, 2009.

(Back to Index)

Distributions are paid from both operating cash flows and a fund level reserve established at the time of the offering.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and cost and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including, in particular those related to accrued liabilities and loan losses. We base our estimates on historical experience, current economic conditions and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a discussion on our critical accounting policies and estimates, see the discussion in our report on Form 10 for the year ended December 31, 2008 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.”

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The principal category of market risk relevant to us is interest rate risk fluctuations. However, since both our debt investments and our debt obligations are at fixed rates of interest, we do not have material interest rate risk exposure. An increase in interest rates would decrease the fair value of our debt investments. However, since we intend to and have the ability to hold these loan investments through to maturity, we believe that fluctuations in fair value during the term of these investments do not present us with material risk.

We also have exposure to credit risk on our loan investments. We mitigate this risk by monitoring the credit profile of the underlying borrowers. In October 2009, the first mortgage holder informed the Partnership that the terms of the intercreditor agreement had become effective due to the continued default by the Acacia borrower. As a result, the first mortgage holder must be repaid in full before the Partnership may receive any current or accrued interest or principal. Therefore, the Partnership placed the Acacia loan on non-accrual status and reserved the entire balance. During the nine months ended September 30, 2009, we recorded a $1.8 million provision for loan loss based on management’s review of the loan. Continued delinquency could adversely impact our ability to make distributions to our limited partners.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our General Partner’s chief executive officer and chief financial officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our General Partner’s chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the three months ended September 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

(Back to Index)

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibit No.		Description
3.1		Amended and Restated Agreement of Limited Partnership. (1)
3.2		Certificate of Limited Partnership. (1)
4.1		Forms of letters sent to limited partners confirming their investment. (1)
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)	Filed previously as an exhibit to the Partnership’s registration statement on Form 10 for the year ended December 31, 2008 and by this reference incorporated herein.

(Back to Index)

SIGNATURES

Pursuant to the requirements of Section 12 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.

	RESOURCE REAL ESTATE INVESTORS 6, L.P.
	By: Resource Capital Partners, Inc., its general partner

November 9, 2009	By: /s/ Kevin M. Finkel
	Kevin M. Finkel
	President

November 9, 2009	By: /s/ Steven R. Saltzman
	Steven R. Saltzman
	Vice President – Finance
	(Principal Financial Officer)

Resource Real Estate Investors 6 LP - FORM 10-Q - November 9, 2009

Attached files

Resource Real Estate Investors 6 LP Reports