FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995. Commission File No. 2-77330
PROPERTY RESOURCES FUND VI
(Exact Name of Registrant as Specified in its Charter)
California 942838890
- --------------------------------------------------------------------------
(State or other jurisdiction or (I.R.S. Employer Identification
incorporation or organization) number)
P.O. Box 7777, San Mateo, CA (415) 312-5824
94403-7777
- --------------------------------------------------------------------------
(Address of principal and executive Registrant's telephone number,
Office) including Area Code
Securities registered pursuant to Section 12(b) of Act:*
Title of each class
Limited Partnership Interests
- -------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 12 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 (Sec. 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 referenced in Part
III of this Form 10-K or any amendment to this Form 10-K. X
No market for the shares currently exists and therefore a market value for the
Units cannot be determined.
Limited Partnership Units outstanding at December 31, 1995: 21,585
Documents Incorporated by Reference: Portions of the Prospectus of Property
Resources Fund VI dated July 12, 1982 (in Part III, Item 13) as filed with the
Securities and Exchange Commission pursuant to Rule 424(b).
PART 1
Item 1. Business
PROPERTY RESOURCES FUND VI (hereinafter referred to either as the "Partnership"
or the "Registrant") is a limited partnership formed in May, 1982 under the
Uniform Limited Partnership Act of the State of California. The General Partner
is Property Resources, Inc., a California corporation, (the "General Partner")
located at 1800 Gateway Drive, San Mateo, California 94404.
The Partnership was organized for the purpose of acquiring, improving,
developing, operating and holding for investment, income-producing real
properties from unaffiliated sellers. The Partnership intended to dispose of its
properties approximately five to eight years after their acquisition and
thereupon liquidate the Partnership. However, depressed real estate markets in
the areas where the Partnership's properties are located have required the
Partnership to extend its holding period in an effort to improve the opportunity
of recovering some of the loss in value of the portfolio. There is no assurance
that the Partnership will be successful in this regard.
As of December 31, 1995, the Partnership had acquired an interest in five real
estate assets located in Houston, Texas; San Antonio, Texas; Oklahoma City,
Oklahoma; Salt Lake City, Utah; and Campbell, California; as more particularly
described in Item 2. Properties. The Partnership later sold the properties
located in Salt Lake City, Utah; Campbell, California and San Antonio, Texas.
The real estate business is competitive, and the Partnership is in competition
with many other entities engaged in real estate investment activities, some of
which have greater assets than the Partnership.
The Partnership will be subject to the risks generally associated with the
ownership of real property, including the possibility that operating expenses
and fixed costs may exceed property revenues; economic conditions may adversely
change further in the markets where the Partnership owns property and the
national market; the real estate investment climate may change; local market
conditions may change adversely due to general or local economic conditions and
neighborhood characteristics; interest rates may fluctuate and the availability,
costs and terms of mortgage financing may change; unanticipated maintenance and
renovations may arise, particularly in older structures; changes in real estate
tax rates and other operating expenses may arise; governmental rules and fiscal
policies may change; natural disasters, including earthquakes, floods or
tornadoes may result in uninsured losses; the financial condition of the tenants
of properties may deteriorate; and other factors which are beyond the control of
the Partnership may occur.
Item 1. Business (Continued)
The Partnership's real estate investments in rental properties will be subject
to the risk of the Partnership's inability to attract or retain tenants and a
consequent decline in rental income.
While one of the Partnership's objectives is to generate cash flow, there can be
no guarantee that the properties will generate sufficient revenue to cover
operating expenses and meet any required payments on any debt obligations of the
Partnership.
The opportunities for sale, and the profitability of any sale, of any particular
property by the Partnership will be subject to the risk of adverse changes in
real estate market conditions, which may vary depending upon the size, location
and type of each property.
There may be shortages or increased costs of fuel, natural gas, water, or
electric power, or allocations thereof by suppliers or governmental regulatory
bodies in areas where the Partnership owns properties. In the event of such
shortages, price increases or allocations may occur, and the operation of such
properties may be adversely affected. It is also possible that legislation on
the state or local level may be enacted which may include some form of rent
control or changes in property tax assessments. There may be changes to federal,
state or local regulations enacted relating to the protection of the
environment.
The Partnership is unable to predict the extent, if any, to which such
shortages, increased prices, legislation, regulations or allocations might occur
and the degree to which the occurrence of such events might adversely affect the
properties owned by the Partnership.
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real property may become liable for the costs of removal or
remediation of certain hazardous substances released on or in its property. Such
laws often impose such liability without regard to whether the owner or operator
knew of, or was responsible for, the release of such hazardous substances, the
presence of such substances, or the failure to properly remediate such
substances, when released. As part of the investigation of properties prior to
acquisition, the Company typically has obtained inspection reports concerning
the condition of the property, including specialized environmental inspection
reports concerning the presence of hazardous substances on the property. The
Company intends to continue this practice.
Item 1. Business (Continued)
Such inspection reports, however, do not necessarily reveal all hazardous
substances or sources thereof, and substances not considered hazardous when a
property is acquired may subsequently be classified as such by amendments to
local, state, and federal laws, ordinances, and regulations. If it is ever
determined that hazardous substances on or in a Company property must be removed
or the release of such substances remediated, the Company could be required to
pay all costs of any necessary cleanup work, although under certain
circumstances, claims against other responsible parties could be made by the
Company. The Company could also experience lost revenues during any such
cleanup, or lower lease rates, decreased occupancy or difficulty selling or
borrowing against the affected property either prior to or following any such
cleanup. The Company is not aware of any hazardous substances on or in its
properties and it has not been notified by any governmental authority of any
noncompliance, liability or other claim in connection with the environmental
condition of any of its properties.
The Americans with Disabilities Act ("ADA"), which generally requires that
buildings be made accessible to people with disabilities, and has separate
compliance requirements for "public accommodations" and "commercial facilities".
If certain uses by tenants of a building constitute a "public accommodation",
the ADA imposes liability for non-compliance on both the tenant and the
owner/operator of the building. The Company has conducted inspections of its
properties to determine whether the exterior and common area of such properties
are in compliance with the ADA and it believes that its properties are in
compliance. If, however, it were ever determined that one or more of the
Company's properties were not in compliance, the Company may be subjected to
unanticipated expenditures incurred to remove access barriers, or to pay fines
or damages related to such non-compliance.
The Company's only business consists of the real estate investment activity
described above. Therefore, information about industry segments is not
applicable. The business is not seasonal.
Item 2. Properties
During its investment phase, the Partnership acquired four existing rental
properties and completed construction of a fifth property. The property
acquisitions were as follows: Clearlake Village Apartments (formerly Village
South) in August, 1982; Waterbury Plaza office complex in December, 1982; Space
Savers One and Space Savers Three mini-warehouses in April, 1983; and 1600 Dell
Avenue office/warehouse in December, 1983. In July, 1984, the Partnership
completed construction of a 244-unit apartment complex known as Grouse Run
Apartments in Oklahoma City, Oklahoma. The investment phase of the Partnership
is complete and the Partnership does not intend to purchase additional
properties. On June 26, 1990, the Waterbury Plaza office complex was lost to
foreclosure. On November 16, 1988, 1600 Dell Avenue was sold. On June 6, 1994,
Space Savers One and Space Savers Three mini-warehouses were sold, but continued
to be operated by the Company for one year after the sale per the terms of a
lease-back agreement, as more fully described below.
The properties are managed by Continental Property Management Co. ("CPMC"),
an affiliate of the General Partner, which performs the leasing, re-leasing
and management related services for the properties.
The buildings and the land upon which the buildings are located are owned
directly by the Partnership in fee. Clearlake Village Apartments and Grouse Run
Apartments are subject to mortgages as more fully described in the notes to the
financial statements included in Item 8. In the opinion of management, the level
of insurance coverage is adequate for each property and within industry
standards.
Clearlake Village Apartments
The Clearlake Village Apartments are located in the Clearlake City area of
Houston, Harris County, Texas. The apartment complex was completed in the summer
of 1976. Situated on a 5-acre site, the complex consists of 174 garden style
apartments in 14 buildings. Apartment units include 24 two-bedroom, two-bath
units of 850 square feet; 40 two-bedroom, one-bath units of 800 square feet; 70
one-bedroom, one-bath units of 670 square feet; and 40 efficiency units of 507
square feet. The property's total net rentable area is 119,580 square feet. As
of December 31, 1995, monthly rental rates ranged from $335 to $525 and the
occupancy was 92%. Amenities for residents include a 4,000 square foot
clubhouse, as well as a swimming pool, laundry, and storage facilities. In 1995,
an exercise room was added in the clubhouse.
Item 2. Properties (Continued)
Space Savers One and Space Savers Three
On June 6, 1994, the Partnership completed the sale of Space Savers One and
Three to an unaffiliated buyer ("Buyer") for a cash purchase price of
$1,800,000. In addition, for a period of one year after the close of escrow, the
Partnership leased Space Savers One and Three back from the Buyer for a triple
net rent of $1.00. The Partnership received net cash flow during the leaseback
period of approximately $375,000. Net proceeds from the sale of Space Savers One
and Three of $294,000 and net cash flow to be received during the leaseback, as
described, were approximately $669,000. Sale proceeds available on October 1,
1994, were used as part of an $800,000 principal pay-down applied to the Grouse
Run Apartments secured debt as described in the following section. Remaining
sale proceeds were used to reduce the debt owed to the General Partner.
Grouse Run Apartments
On August 19, 1983, the Partnership entered into various agreements with
Robertson Homes ("RH") a division of the Catwil Corporation. The agreements
included a purchase/sale agreement, construction management agreement and an
operating management agreement. Pursuant to these agreements, the Partnership
acquired a 10-acre site in northwest Oklahoma City and began construction of the
Grouse Run Apartments. The construction was completed in phases by RH pursuant
to a fixed-price agreement with final completion occurring in July, 1984. The
project consists of 31 two-story buildings with a total of 201,524 square feet
of leasable area. There are 244 rental units as follows: 120 one-bedroom,
one-bath units of 702 square feet, 44 two-bedroom, one-bath units of 871 square
feet and 80 two-bedroom, two-bath units of 987 square feet. As of December 31,
1995, monthly rental rates ranged from $270 to $475 per unit and the occupancy
was 92%.
A loan modification for the property was negotiated and executed by the lender
and the Partnership on October 23, 1990. The effective date of the modification
was January 1, 1990. The note had an outstanding principal balance of $5,893,000
which, pursuant to the modification, was segregated into two parts. Part A of
the note had an original balance of $4,400,000 and accrued interest at a rate of
9.75% through the end of 1990. Thereafter, the interest rate increased to 10%
through 1992. Beginning in 1993 and continuing in 1994 the interest rate
increased to 10.5%. Principal and interest payments on this portion of the note
are made monthly.
Item 2. Properties (Continued)
Grouse Run Apartments (Continued)
Part B of the note had an original balance of $1,493,000 and accrued interest at
the rate of 10.5%. Accrued and unpaid interest on the Part B principal balance
was compounded and added to principal monthly. Part B of the note was to be
repaid only from 50% of net sale or net refinance proceeds.
On October 1, 1994, the Note Payable was amended. The Amendment replaced the
terms of Part A and Part B with fixed interest at 9.96%, amortized on a 30-year
schedule. A principal payment of $800,000 was made by the Partnership concurrent
with the effective date of the Amendment. The Amended Note has a new principal
balance of $3,884,000 and its maturity date has been extended to October 1,
1999. Monthly debt service on the Amended Note was reduced from $40,249 to
$33,970.
Item 3. Legal Proceedings
There are no material legal proceedings pending to which the Partnership is a
party or which any of its properties is the subject, required to be reported
hereunder. From time to time, the Partnership may be a party to ordinary routine
litigation incidental to its business.
Item 4. Submission Of Matters To A Vote Of Security Holders
No matters have been submitted during the fourth quarter of the fiscal year
ended December 31, 1995, which required the vote of security holders.
PART II
Item 5. Market For Registrant's Common Stock And Related Stockholder Matters
As of December 31, 1995, there were 21,585 limited partnership units outstanding
and 1,136 unit holders of record.
There are no dividends. However, the limited partnership unit holders may be
entitled to certain cash distributions as provided in the limited partnership
agreement.
The units are not freely transferable and no market for the units presently
exists or is likely to develop.
Item 6. Selected Financial Data
The following selected financial data for the Partnership is for the years ended
December 31, 1995, 1994, 1993, 1992 and 1991. The data was derived from the
audited financial statements of the Partnership and should be read in
conjunction with the financial statements and related notes included in Item 8.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenue $2,178,000 $2,614,000 $2,275,000 $2,139,000 $2,025,000
Interest expense $ - $324,000 $608,000 $631,000 $696,000
Depreciation and
amortization
expense $293,000 $309,000 $355,000 $420,000 $417,000
Operating expenses $1,054,000 $1,163,000 $1,088,000 $1,067,000 $1,041,000
Related party
expenses $379,000 $382,000 $369,000 $371,000 $295,000
General and
administrative
expenses $22,000 $45,000 $40,000 $36,000 $44,000
Gain on note
restructure - $272,000 - - -
Net income (loss) $430,000 $663,000 $(185,000) $(386,000) $(468,000)
Total assets $7,696,000 $7,960,000 $9,848,000 $10,065,000 $10,553,000
Notes payable $6,942,000 $7,363,000 $10,108,000 $10,189,000 $10,201,000
Net income (loss) $18.95 $29.56 $(8.15) $(17.00) $(20.62)
per unit1
Number of limited
partnership units
outstanding 21,585 21,585 21,585 21,585 21,585
</TABLE>
1Per $500 limited partnership unit outstanding, exclusive of amounts allocable
to the General Partner.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
Net income for 1995 decreased $233,000 or 35% as compared to 1994 due to the
following factors: a decrease in rental revenue of $230,000; a decrease in
interest and dividends of $7,000; a decrease in gain on sale of rental property
of $199,000; a decrease in interest expense of $324,000; a decrease in
depreciation and amortization of $16,000; a decrease in operating expenses of
$109,000; a decrease in related party of $3,000, a decrease in general and
administrative expense of $23,000, and a decrease in gain on note restructuring
of $272,000.
Rental revenue from the Partnership's properties was $2,133,000 and $2,363,000
for the years ended December 31, 1995 and 1994, respectively. The decrease in
rental revenue of $230,000 for the year 1995 when compared to the same period in
1994 is due to the end of the leaseback period of Space Savers One and Three on
June 6, 1995.
Interest revenue decreased $7,000, due to the reduced balance of the note
receivable.
Gain on sale of rental property decreased by $199,000, or 100%, as a result of
the sale of Space Savers One and Three in June, 1994.
Total expenses decreased by $475,000, or 21%, from $2,223,000 in 1994 to
$1,748,000. The decrease in total expenses is attributable to the following
factors: a decrease in interest expense of $324,000, or 100%; a decrease in
depreciation and amortization of $16,000, or 5%; a decrease in operating
expenses of $109,000, or 9%; a decrease in related party expense of $3,000, or
1%; and a decrease in general and administrative expense of $23,000, or 51%.
Interest expense decreased $324,000, due to the sale of Space Savers One and
Three in June, 1994 and to the amended Grouse Run note payable in October, 1994.
The amended Grouse Run note payable is classified as a troubled debt
restructuring and, in accordance with Statement of Financial Accounting
Standards No. 15, the Partnership is carrying the amended note equal to the
total future cash payments payable and is not recognizing interest expense
between the restructuring and the maturity of the amended note.
Depreciation and amortization expense decreased $16,000, as a result of the sale
of Space Savers One and Three in the second quarter of 1994.
Operating expenses decreased $109,000 , as a result of the end of the leaseback
period of Space Savers One and Three on June 6, 1995.
Related party expense decreased $3,000, as a result of a decrease in accounting
and data processing expenses offset by an increase in the prime rate of interest
charged on advances from the General Partner.
General and administrative expense decreased $23,000 due to a decrease in
consulting and outside fees and services.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993
Rental income from the Partnership's properties was $2,363,000 and $2,223,000
for the years ended December 31, 1994 and 1993, respectively. The increase in
rental revenue of $140,000 for the year ended December 31, 1994 when compared to
the same period in 1993 is attributable to an increase in the rental rates at
Grouse Run Apartments and an increase in the average occupancy rates at
Clearlake Village Apartments and Space Savers One and Three. For the years ended
December 31, 1994 and 1993, the average occupancy rate at Clearlake Village
Apartments was 91.2% and 87.7%, and at Space Savers One and Three it was 92.6%
and 88.7%, respectively.
Gain on sale of rental property increased by $199,000 as a result of the sale of
Space Savers One and Three in the second quarter of 1994.
Total expenses decreased by $237,000, or 10%, from $2,460,000 in 1993 to
$2,223,000. The decrease in total expenses is attributable to the following
factors: a decrease in interest expense of $284,000, or 47%; a decrease in
depreciation and amortization of $46,000, or 13%; an increase in operating
expenses of $75,000, or 7%; an increase in related party expense of $13,000, or
4%; and an increase in general and administrative expense of $5,000, or 13%.
Interest expense decreased $284,000, as a result of the payment of the note upon
the sale of Space Savers One and Three in the second quarter of 1994.
Depreciation and amortization expense decreased $46,000, as a result of the sale
of Space Savers One and Three in the second quarter of 1994.
Operating expenses increased $75,000 , as a result of an increase in repair and
maintenance, utilities, and payroll expenses.
Related party expense increased $13,000, as a result of an increase in interest
accrued on the outstanding advances due to the General Partner and an increase
in property management fees due to the increase in rental revenue at the
Partnership's properties.
General and administrative expense increased $5,000 due to an increase in
outside fees and services as a result of the purchase of the partnership
administrative system.
The Partnership's properties are managed by Continental Property Management Co.
("CPMC"), an affiliate of the General Partner. During 1995, the Partnership
accrued or paid $96,000 to CPMC in accordance with the Property Management
Agreement.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
Liquidity and Capital Resources
In July, 1983, the Partnership completed a public offering of its limited
partnership units with total proceeds of $10,795,500 from the sale of 21,585
limited partnership units. The Partnership acquired five properties with an
aggregate cost of $23,526,000.
As of December 31, 1995, the Partnership had two operating properties: Clearlake
Village Apartments, and Grouse Run Apartments. The buildings and the land upon
which the buildings are located are owned directly by the Partnership in fee,
and all Partnership properties are subject to mortgages, as more fully described
in notes 2 and 4 to the financial statements included in Item 8.
As of December 31, 1995, cash and cash equivalents totaled $251,000. As of
December 31, 1995, the General Partner had advanced, $506,000 plus accrued
interest of $493,000, to the Partnership to pay for various capital improvements
and to support operating cash flow deficits. The General Partner presently
intends to continue to make such advances to the Partnership as necessary.
Consequently, management believes that the Partnership's current sources of
funds will be adequate to meet both its short-term and long-term capital
commitments and operating requirements.
The Partnership presently believes that funds available from improved operations
and from its note receivable due in 1999 will permit it to repay advances owed
to the General Partner. The Partnership also believes that the present trend
toward improved operations at its properties will permit it to repay the Grouse
Run note payable due in 1999 either from the sale of a property or a loan
refinancing.
On November 15, 1994, the Partnership entered into a loan modification agreement
(the "Agreement"). The Agreement modifies the terms of the Promissory Note
Secured by Deed of Trust, dated November 15, 1988 (the "Note"), which granted
the Borrower a loan (the "Loan") in the principal amount of $714,852, and which
became due on November 15, 1994; and a Deed of Trust with Assignment of Rents,
dated November 15, 1988, which secured the Loan with certain real property
located at 1600 Dell Avenue in Campbell, California. Under the terms of the
original Loan, the principal balance had been paid down to $514,852 as of
November 15, 1994. Under the terms of the Agreement, the Partnership received a
principal paydown of $15,638, an extension fee in the amount of $10,500 and was
due an additional principal reduction payment of $35,000 plus accrued interest
on or before January 31, 1995, which was paid. The Agreement also modifies the
interest rate under the Note to 10% and calls for fully amortized monthly
interest and principal payments to the Partnership of $9,863. The maturity date
of the Loan has been extended to November 15, 1999.
Impact of Inflation
The Partnership's management believes that inflation may have a positive effect
on the Partnership's property portfolio, but this effect generally will not be
fully realized until such properties are sold or exchanged.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements and Schedules
Page
Report of Independent Accountants 18
Balance Sheets as of December 31, 1995 and 1994 19
Statements of Operations for the Years
Ended December 31, 1995, 1994 and 1993 20
Statements of Partners' Capital (Deficit) for the
Years Ended December 31, 1995, 1994 and 1993 21
Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993 22
Notes to Financial Statements 23-24
Schedule III - Real Estate and Accumulated
Depreciation 25-26
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
REPORT OF INDEPENDENT ACCOUNTANTS
The Partners
Property Resources Fund VI
We have audited the financial statements and the financial statement schedule of
Property Resources Fund VI as of December 31, 1995 and 1994, and for each of the
three years in the period ended December 31, 1995, as listed in the index of
Item 8 of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of Property Resources Fund VI's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule 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 referred to above present fairly, in
all material respects, the financial position of Property Resources Fund VI as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
San Francisco, California
January 20, 1996
PROPERTY RESOURCES FUND VI
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
1995 1994
ASSETS
Rental property:
Land $2,239,000 $2,239,000
Land improvements 748,000 748,000
Buildings and improvements 7,167,000 7,124,000
Furnishings and equipment 1,005,000 951,000
- ----------------------------------------------------------------------
11,159,000 11,062,000
Less: accumulated depreciation 4,128,000 3,841,000
- ----------------------------------------------------------------------
7,031,000 7,221,000
Cash and cash equivalents 251,000 131,000
Note receivable 382,000 493,000
Other assets 32,000 115,000
- ----------------------------------------------------------------------
Total assets $7,696,000 $7,960,000
======================================================================
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Note payable $5,231,000 $5,639,000
Note payable to affiliate 1,711,000 1,724,000
Due to General Partner 506,000 805,000
Accrued interest due to General Partner 493,000 435,000
Tenants' deposits and other liabilities 214,000 246,000
- ----------------------------------------------------------------------
Total liabilities 8,155,000 8,849,000
- ----------------------------------------------------------------------
Partners' capital (deficit):
Limited partners, 21,585 units issued
and outstanding 21,000 (388,000)
General Partner (480,000) (501,000)
- ----------------------------------------------------------------------
Total partners' capital (deficit) (459,000) (889,000)
- ----------------------------------------------------------------------
Total liabilities and partners' capital $7,696,000 $7,960,000
======================================================================
The accompanying notes are an integral part of these financial statements.
PROPERTY RESOURCES FUND VI
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
-- ----- -- ----- -- ----
Revenue:
Rent $2,133,000 $2,363,000 $2,223,000
Interest and dividends 45,000 52,000 52,000
Gain on sale of rental property - 199,000 -
- ---------------------------------------------------------------------------
Total revenue 2,178,000 2,614,000 2,275,000
- ---------------------------------------------------------------------------
Expenses:
Interest, other than related party - 324,000 608,000
Depreciation and amortization 293,000 309,000 355,000
Operating 1,054,000 1,163,000 1,088,000
Related party 379,000 382,000 369,000
General and administrative 22,000 45,000 40,000
- ---------------------------------------------------------------------------
Total expenses 1,748,000 2,223,000 2,460,000
- ---------------------------------------------------------------------------
Income (loss) before
gain on note restructuring 430,000 391,000 (185,000)
Gain on note restructuring - 272,000 -
- ---------------------------------------------------------------------------
Net income (loss) $430,000 $663,000 $(185,000)
===========================================================================
Net income (loss) allocable
to limited partners $409,000 $638,000 $(176,000)
===========================================================================
Net income (loss) allocable
to General Partner $21,000 $25,000 $(9,000)
===========================================================================
Net income (loss) per $500 limited
partnership unit - based on 21,585 units
outstanding and net of income (loss)
allocable to the
General Partner $18.95 $29.56 $(8.15)
===========================================================================
Gain on note restructuring per
$500 limited partnership
unit-based on 21,585
units outstanding and net of
gain on note restructuring
allocable to General Partner $ - $11.97 $ -
===========================================================================
The accompanying notes are an integral part of these financial statements.
PROPERTY RESOURCES FUND VI
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Limited Partners
General
Units Amount Partner Total
Balance, December 31, 1992 21,585 $(850,000) $(517,000) $(1,367,000)
Net loss - (176,000) (9,000) (185,000)
- ----------------------------------------------------------------------------
Balance, December 31, 1993 21,585 (1,026,000) (526,000) (1,552,000)
Net income - 638,000 25,000 663,000
- ----------------------------------------------------------------------------
Balance, December 31, 1994 21,585 (388,000) (501,000) (889,000)
Net income - 409,000 21,000 430,000
- ----------------------------------------------------------------------------
Balance, December 31, 1995 21,585 $21,000 $(480,000) $(459,000)
============================================================================
The accompanying notes are an integral part of these financial statements.
PROPERTY RESOURCES FUND VI
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net income (loss) $430,000 $663,000 $(185,000)
- ----------------------------------------------------------------------------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 293,000 309,000 355,000
Amortization of capitalized
interest on debt restructuring - (284,000) (260,000)
(Increase) decrease in other assets 77,000 66,00 (51,000)
Increase in accrued interest 58,000 237,00 267,000
Increase (decrease) in tenants'
deposits and other liabilities (32,000) 25,000 38,000
Gain on sale of rental property - (199,000) -
Gain on note restructuring - (272,000) -
- ----------------------------------------------------------------------------
396,000 (118,000) 349,000
- ----------------------------------------------------------------------------
Net cash provided by operating
activities 826,000 545,000 164,000
- ----------------------------------------------------------------------------
Cash flows from investing activities:
Improvements to rental property (97,000) (77,000) (76,000)
Proceeds from sale of rental
property - 294,000 -
Principal received on note
receivable 111,000 72,000 50,000
- ----------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 14,000 289,000 (26,000)
- ----------------------------------------------------------------------------
Cash flows from financing activities:
Advances from (payments to) General
Partner (299,000) 117,000 (31,000)
Principal payments on notes payable (421,000) (936,000) (46,000)
- ----------------------------------------------------------------------------
Net cash used in financing activities (720,000) (819,000) (77,000)
- ----------------------------------------------------------------------------
Net increase in cash and cash
equivalents 120,000 15,000 61,000
Cash and cash equivalents,
beginning of year 131,000 116,000 55,000
- ----------------------------------------------------------------------------
Cash and cash equivalents,
end of year $251,000 $131,000 $116,000
============================================================================
The accompanying notes are an integral part of these financial statements.
PROPERTY RESOURCES FUND VI
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Business Activity
Property Resources Fund VI (the "Partnership") is a California limited
partnership formed on May 3, 1982 for the purpose of investing in
income-producing real estate. Property Resources, Inc. is the General Partner.
The offering period for the sale of limited partnership interests was terminated
in July, 1983 with a total funding of $10,795,500 and 21,585 units subscribed.
As of December 31, 1995, there were 21,585 limited partnership units
outstanding. The units are not freely transferable and no public market for the
units exists or is likely to develop.
As of December 31, 1995, the Partnership owned the following rental properties:
Clearlake Village Apartments, located in Houston, Texas; and Grouse Run
Apartments located in Oklahoma City, Oklahoma.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Significant Accounting Policies
Rental Property
Rental property is stated at cost and depreciated using the straight-line method
over 10 to 20 years for land improvements, 10 to 35 years for buildings and
improvements and 4 to 5 years for furnishings and equipment. Significant
improvements and betterments are capitalized. The cost and related accumulated
depreciation of assets sold are removed from the accounts and any gain or loss
is reflected in operations. Maintenance, repairs and minor renewals are charged
to expense when incurred.
Pursuant to the Company's investment objectives, property purchased is generally
held for extended periods. During the holding period, management periodically,
but at least annually, evaluates whether rental property has suffered an
impairment in value. Management's analysis includes consideration of estimated
undiscounted future cash flows during the expected holding period in comparison
with carrying values, prevailing market conditions and other economic matters.
If the current carrying value of an individual property exceeds estimated future
undiscounted cash flows, the Company would reduce the carrying value of the
asset to fair value.
PROPERTY RESOURCES FUND VI
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Accounting Policies (Continued)
Cash and Cash Equivalents
The Partnership classifies all highly liquid investments with original
maturities of three months or less from the date acquired as cash equivalents.
Income Taxes
Under federal and state income tax regulations, the income or loss of a
partnership flows through to the partners and is reported on their individual
income tax returns; accordingly, no provision for income taxes is made in these
financial statements.
Amortization
Loan fees are deferred and amortized over the life of the related loan by a
method which approximates the effective yield method.
Concentration of Credit Risk
Financial instruments which potentially subject the Partnership to
concentrations of credit risk consist principally of a note receivable (See Note
3) and money market securities.
The Partnership places excess cash in short-term deposits with Franklin Money
Fund, an investment company managed by an affiliate of the General Partner, and
in money market securities of companies with strong credit ratings and, by
policy, limits credit exposure to any one issuer. The Partnership performs
ongoing credit evaluations of its tenants as is consistent with normal industry
practice. The Partnership reserves for potential credit losses, as appropriate,
and such losses have been within management's expectations.
NOTE 2 - TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
Allocations to Partners
The limited partnership agreement provides for the following allocations to
partners:
Cash available for distribution from operations, as defined, shall be
allocated 95% to the limited partners in the ratio of capital contributions
and 5% to the General Partner as a partnership management fee.
Income and losses from operations shall be allocated 95% to the limited
partners in the ratio of their capital contributions and 5% to the General
Partner.
PROPERTY RESOURCES FUND VI
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 2 - TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (Continued)
Net proceeds from the refinancing of debt or sale of partnership property
shall be allocated first to the limited partners in an amount which when
added to prior distributions will equal capital contributions plus a
specified return ranging from 6% to 10% per annum on adjusted invested
capital, as defined. After payment of a subordinated real estate commission
to the General Partner, any remaining proceeds shall be allocated 85% to the
limited partners and 15% to the General Partner.
Transactions with General Partner
Under the partnership agreement, the General Partner and its affiliates may
receive compensation for services rendered to the Partnership and may receive
reimbursement for certain expenses incurred on behalf of the Partnership. The
Partnership made or accrued the following payments to the General Partner or its
affiliates:
1995 1994 1993
---- ---- ----
Property management fees, charged to
related party expense $96,000 $96,000 $92,000
Reimbursement for accounting and data
processing expenses, charged to related
party expense $44,000 $53,000 $52,000
Interest on advances from the General
Partner, charged to related party
expense $59,000 $52,000 $42,000
Interest on promissory note
collateralized by the property
Clearlake Village Apartments, charged
to related party expense $180,000 $181,000 $183,000
Advances from the General Partner at December 31, 1995 and 1994 totaled $506,000
and $805,000 plus accrued interest of $493,000 and $435,000, respectively.
Interest on advances was accrued at the prime rate, which ranged between of 8.5%
and 9.0% during 1995. Interest expense on the advances for 1995, 1994 and 1993
was $59,000, $52,000 and $42,000, respectively. The advances are due on demand.
A promissory note payable to Franklin Resources, Inc., the parent of the General
Partner, is collateralized by the Clearlake Village Apartments. As of December
31, 1995, the outstanding principal balance amounted to $1,711,000. The note is
payable in monthly installments of $16,099 including principal and interest at
10.50% to June, 2001, when the entire unpaid principal balance is due. Interest
expense on the note in 1995, 1994 and 1993 was $180,000, $181,000 and $183,000,
respectively.
PROPERTY RESOURCES FUND VI
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Advances from General Partner
As of December 31, 1995, the General Partner had advanced $506,000 to the
Partnership to pay for various capital improvements and to support operating
cash flow deficits. The General Partner presently intends to continue to make
such advances to the Partnership, as necessary. Consequently, management
believes that the Partnership's current sources of funds will be adequate to
meet both its short-term and long-term capital commitments and operating
requirements.
NOTE 3 - NOTE RECEIVABLE
On November 15, 1994, the promissory note receivable in the amount of $514,852,
collateralized by a second deed of trust against 1600 Dell Avenue Office
complex, was amended for a principal paydown of $15,638 and an agreement to pay
an additional $35,000 on or before January 31, 1995. Fully amortized principal
and interest payments at 10% are due monthly in the amount of $9,863 commencing
on December 15, 1994 until maturity on November 15, 1999.
NOTE 4 - NOTE PAYABLE
On October 1, 1994, the Grouse Run note payable was amended. The amendment
provides for fixed interest at 9.96%, amortized on a 30-year schedule. A
principal payment of $800,000 was made by the Partnership concurrent with the
effective date of the amendment. The amended note has a new face value principal
balance of $3,884,000 and its maturity date has been extended to October 1,
1999. Monthly debt service of the amended note was reduced from $40,249 to
$33,970.
The amended note payable is classified as a troubled debt restructuring and, in
accordance with Statement of Financial Accounting Standards No. 15, the
Partnership is carrying the amended note equal to the total future cash payments
payable and is not recognizing interest expense between the restructuring and
the maturity of the amended note. In 1994, gain from the restructuring of the
note amounted to $272,000.
Aggregate principal payments required in future years, including principal
payments on the restructured note and the note payable to affiliate, are
estimated as follows:
1996 $422,000
1997 423,000
1998 425,000
1999 4,028,000
2000 22,000
Thereafter 1,622,000
---------
$6,942,000
PROPERTY RESOURCES FUND VI
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 5 - SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Interest paid on notes payable for the years ended December 31, 1995, 1994 and
1993, was $179,000, $601,000 and $642,000, respectively.
Approximately $185,000 and $225,000 of accrued and unpaid interest was
capitalized to principal on the notes payable for the years ended December 31,
1994 and 1993, respectively.
NOTE 6 - PURCHASE AND SALE OF RENTAL PROPERTY
On June 6, 1994, the Partnership sold the Space Savers One and Space Savers
Three mini-warehouse facilities to an unaffiliated party. The sale price was
$1,800,000, and the gain on sale of the property was $199,000. Additionally,
approximately $1,400,000 of the sales price was utilized to pay in full the note
payable collateralized by the property. In connection with the sale, the
Partnership leased the property back from the buyer for one year for a triple
net rent of $1.00.
PROPERTY RESOURCES FUND VI
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 7 - RECONCILIATION TO FEDERAL INCOME TAX BASIS OF ACCOUNTING (Unaudited)
The differences between the accrual method of accounting for income tax
reporting and the accrual method of accounting used in the accompanying
financial statements are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- -- ----- -- ----
<S> <C> <C> <C>
Net income (loss) financial statements $430,000 $663,000 $(185,000)
Differences resulting from:
Depreciation (106,000) (249,000) (306,000)
Interest Expense (475,000) - -
Amortization of capitalized
interest on debt restructuring - (284,000) (260,000)
Gain on disposition of property 65,000 211,000 29,000
Gain on restructuring of note - 1,857,000 -
Other - 1,000 1,000
- ------------------------------------------------------------------------------------
Net income (loss) income tax method $(86,000) $2,199,000 $(721,000)
====================================================================================
Net taxable income (loss) per limited
partnership unit and net of amounts
allocable to the General Partner $(3.66) $104.38 $(31.74)
====================================================================================
Partners' capital (deficit) - financial
statements $(459,000) $(889,000) $(1,552,000)
Differences resulting from:
Depreciation (4,873,000) (4,767,000) (4,518,000)
Interest Expense (475,000) - -
Amortization of capitalized interest
on debt restructuring - - 284,000
Gain on disposition of property (222,000) (287,000) (329,000)
Write-down on rental property 1,452,000 1,452,000 1,452,000
Note restructuring 2,028,000 2,028,000 -
Note restructuring basis adjustment (2,129,000) (2,129,000) -
Other - - 1,000
- ------------------------------------------------------------------------------------
Partners' capital (deficit) income tax
method $(4,678,000) $(4,592,000) $(4,662,000)
====================================================================================
</TABLE>
==============================================================================
PROPERTY RESOURCES FUND VI
==============================================================================
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF, AND FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Cost Capitalized
Initial Subsequent To Gross Amount at Which
Cost to Fund Acquisition Carried at Close of Period
Life
on
Which
Deprecia-
tion
in
Latest
Operations
State-
Buildings Buildings Accumula ment
and Improve- Carrying and ted Date of Date is
Descrip- Encum- ments Improve- Costs Improve- Deprecia const- Acqu- Comp-
tion brances Land ments Land ments Total tion ruction ired uted
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
174 unit $1,711,000 $999,000 $3,662,000 $397,000 $ - $999,000 $2,804,000 $3,803,000 $1,641,000 1976 8/82 (2)
apartment
complex in
Houston,
Texas
244 unit 5,231,000 1,240,000 6,562,000 474,000 - 1,240,000 6,116,000 7,356,000 2,487,000 1984 7/84 (2)
apartment
complex in
Oklahoma
City,
Oklahoma
- ----------------------------------------------------------------------------------------------------------------------------------
$6,942,000 $2,239,000 $10,224,000 $871,000 $ - $2,239,000 $8,920,000 $11,159,000 $4,128,000
==================================================================================================================================
(1), (3), (4)
</TABLE>
PROPERTY RESOURCES FUND VI
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTES:
(1) The aggregate cost for federal income tax purposes is $12,611,000.
(2) Depreciation is computed using useful lives of 10-20 years for land
improvements, 10-35 years for buildings, improvements and 4-5 years for
furnishings and equipment and the life of the related lease for tenant
improvements.
(3) The total cost carried at the close of the period has been adjusted to
reflect the Partnership's reduction in the carrying values for the apartment
complexes located in Houston, Texas and Oklahoma City, Oklahoma.
(4) Reconciliation of Real Estate
1995 1994 1993
---- ---- ----
Balance at beginning of year $11,062,000 $13,916,000 $13,840,000
Disposition of rental
property - (2,931,000) -
Additions during the year 97,000 77,000 76,000
- ---------------------------------------------------------------------------
Balance at end of year $11,159,000 $11,062,000 $13,916,000
===========================================================================
(5) Reconciliation of Accumulated Depreciation
1995 1994 1993
---- ---- ----
Balance at beginning of period $3,841,000 $4,943,000 $4,601,000
Depreciation for the year 287,000 296,000 342,000
Disposition of rental property - (1,398,000) -
- -------------------------------------------------------------------------
Balance at end of year $4,128,000 $3,841,000 $4,943,000
=========================================================================
Item 9. Disagreements on Accounting and Financial Disclosure
None.
Item 10. Directors and Executive Officers Of The Company And The Advisor
The Partnership does not now, nor will it in the future, have directors or
executive officers. Property Resources, Inc. (the "General Partner"), manages
and directs the affairs of the Partnership and has general responsibility in all
matters affecting the business of the Partnership. The officers and directors of
the General Partner are as follows:
Name Position
David P. Goss Chief Executive Officer, President and a
Director
Charles B. Johnson Director
Rupert H. Johnson, Jr. Director
Charles E. Johnson Director
Michael J. McCulloch Executive Vice President
Richard S. Barone Senior Vice President - Legal and Secretary
Martin L. Flanagan Vice President - Finance and Chief Financial
Officer
Mark A. TenBoer Vice President - Asset Management
David P. Rath Vice President - Asset Management
David N. Popelka Vice President - Asset Management
Principal officers of the subsidiary of the General Partner, Continental
Property Management Co., are as follows:
Thomas J. Bennett President, Chief Financial Officer and Sole
Director
Charles L. Gee Senior Vice President and Secretary
David P. Goss, age 48, is Chief Executive Officer, President and Director
of the Company (1988 to date). He is also Chief Executive Officer, President and
Director of Property Resources, Inc., Property Resources Equity Trust (1987 to
date), the Advisor (1988 to date), Franklin Select Real Estate Income Fund (1989
to date), and Franklin Advantage Real Estate Income Fund (1990 to date).
Previously, he was Corporate Counsel of Franklin Resources, Inc. Prior to
joining Franklin Resources, Inc., Mr. Goss served as Senior Vice President
- -Legal of a real estate investment and property management company. Prior to
that, he was with the Securities and Exchange Commission in San Francisco,
California. Mr. Goss has a B.A. degree from the University of California,
Berkeley, and a J.D. degree from the New York University School of Law. He is a
registered principal with the National Association of Securities Dealers, Inc.
Item 10. Directors and Executive Officers Of The Company And The Advisor
(Continued)
Charles B. Johnson, age 63, has served since 1985 as a Director of the
General Partner. He is also President and a Director of Franklin Resources,
Inc. and Franklin/Templeton Distributors, Inc.; Chairman of the Board and a
Dire ctor of Franklin Advisers, Inc. and Franklin Asset Management Systems;
President, Treasurer and a Director of Franklin Energy Corporation; and a
Director of Franklin Institutional Services Corporation, Franklin Trust
Company, Franklin/Templeton Investor Services, Inc., Franklin Bank, F.S.
Capital Group, F.S. Properties, Inc., and Franklin Agency, Inc. He is also
and officer and/or director, trustee or managing general partner, as the case
may be, of most of the investment companies in the Franklin/Templeton Group
of Funds. Mr. Johnson graduated from Yale University in 1954 where he
received a B.A. degree in Economics. He is a registered securities principal
with the National Association of Securities Dealers, Inc.
Item 10. Directors and Executive Officers Of The Company And The Advisor
(Continued)
Rupert H. Johnson, Jr., age 55, has served since 1990 as Executive Vice
President of Franklin Resources, Inc. He is also Executive Vice President and a
Director of Franklin/Templeton Distributors, Inc.; President and a Director of
Franklin Advisers, Inc.; Chairman of the Board and a Director of Franklin
Management, Inc. and Franklin Institutional Services Corporation; Vice President
and a Director of Franklin Asset Management Systems; Executive Vice President,
Senior Investment Officer and a Director of Franklin Trust Company; Vice
President of BWC Management Company; and a Director of Franklin/Templeton
Investor Services, Inc., Franklin Agency, Inc., Franklin Energy Corporation,
Franklin Bank, Franklin Properties, Inc., and the General Partner. He also
currently serves as a Director or Trustee and Vice President of most of the
mutual funds in the Franklin/Templeton Group of Funds. Mr. Johnson received a
B.A. degree from Washington & Lee University. He is a registered principal with
the National Association of Securities Dealers, Inc.
Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
Charles E. Johnson, age 39, is President and Chief Executive Officer of
Templeton Worldwide, Inc. This company provides investment advisory services
with respect to both international equity and fixed income securities, largely
based upon fundamental research and a flexible policy of seeking undervalued
securities throughout the world. Templeton Worldwide, Inc. employs more than 50
investment professionals worldwide and maintains marketing and/or research
offices in over 15 separate countries. Mr. Johnson is also a Senior Vice
President and Director of Franklin Resources, Inc., the parent company of the
Templeton organization. He also services as a Director and/or Officer of many of
the various Franklin and Templeton mutual funds and subsidiaries. He received a
Masters degree in Business Administration from the Harvard University Graduate
School of Business. He is a Certified Public Accountant and was previously
affiliated with the accounting firm of Coopers & Lybrand in Los Angeles. He
graduated with honors from the University of California at Los Angeles, earning
a Bachelor of Arts degree in Economics.
Michael J. McCulloch, age 48, is Executive Vice President of the General
Partner (1987 to date). He is also Executive Vice President of the Property
Resources Equity Trust (1987 to date), Franklin Properties, Inc., Franklin Real
Estate Income Fund (1988 to date), Franklin Select Real Estate Income Fund (1989
to date), and Franklin Advantage Real Estate Income Fund (1990 to date). Mr.
McCulloch actively operated an unaffiliated real estate brokerage and property
management consulting firm from 1983 to 1987. From 1981 to 1984, Mr. McCulloch
served as Executive Vice President of Morse-Nederveld, Inc., a real estate
syndication firm. Mr. McCulloch was also a director and an officer of the
General Partner from 1976 to 1980. He attended California State University, Los
Angeles and the University of Southern California.
Richard S. Barone, age 45, is Senior Vice President - Legal and
Secretary of the General Partner (1988 to date). He is also Secretary of
Franklin Properties, Inc., Property Resources Equity Trust, Franklin Real
Estate Income Fund (1988 to date), Franklin Select Real Estate Income Fund
(1989 to date), and Franklin Advantage Real Estate Income Fund (1990 to
date). He is also Senior Vice President - Legal of Franklin Properties, Inc.
(1988 to date) and Corporate Counsel of Franklin Resources, Inc. (1988 to
date). Previously, Mr. Barone was employed by the Robert A. McNeil
Corporation as Corporate Counsel from 1982 until June, 1987, during which
period he also held the positions of Vice President-Legal (1984 to 1987) and
Secretary (1986 to 1987). Prior to 1982, he was in a private law practice in
San Mateo, California. Mr. Barone received a B.A. degree and a J.D. degree
from the University of San Francisco. He is a member of the State Bar of
California.
Item 10. Directors and Executive Officers Of The Company And The Advisor
(Continued)
Martin L. Flanagan, age 35, is Vice President - Finance and Chief
Financial Officer of the General Partner, Property Resources Equity Trust and
Franklin Properties, Inc., Inc. (1993 to date). He is also Senior Vice
President, Chief Financial Officer and Treasurer of Franklin Resources, Inc.;
Senior Vice President and Treasurer of Franklin/Templeton Distributors, Inc.,
Franklin Advisers, Inc., and Franklin Institutional Services Corporation;
Treasurer of Franklin Management, Inc., and Franklin Trust Company; Senior Vice
President of Franklin/Templeton Investor Services, Inc. and Franklin Agency,
Inc.; a Director of Templeton/National Bank of Greece Management (Luxembourg),
Templeton Investment Management (Singapore), Templeton Investment Management
(Hong Kong), Templeton Funds Investment Annuity Company, Templeton Funds Trust
Company, Templeton Funds Management, Inc., Templeton Holding Ltd.,
Templeton/Franklin Investment Services, Inc., Templeton Life Assurance Ltd.,
Templeton Quantitative Advisors, Inc., Templeton Emerging Markets, Templeton
Management (Luxembourg), Templeton Unit Trust Managers, Ltd., and Templeton
Investment Management, Ltd. (Edinburgh); Executive Vice President, Chief
Operating Officer and a Director of Templeton Worldwide, Inc. and Templeton
International, Inc.; Executive Vice President and a Director of T.G.H. Holdings,
Ltd.; Chairman of the Board of Templeton Global Strategic Services, Inc.;
General Manager of Templeton Financial Advisory Services, S.A.; Managing
Director of Templeton Global Investors, Ltd.; President and Chief Executive
Officer of Templeton Global Investors; and Executive Vice President and a
Director of Templeton, Galbraith & Hansberger, Ltd. and Templeton Investment
Counsel, Inc. From 1982 to 1983, he was an auditor for Arthur Andersen &
Company. Mr. Flanagan received a B.A. degree from Southern Methodist University
and is a Certified Public Accountant and a Chartered Financial Analyst. He is
currently a member of the American Institute of Certified Public Accountants and
the International Society of Financial Analysts.
Mark A. TenBoer, age 39, is Vice President - Asset Management for the
General Partner, Franklin Properties, Inc. (1991 to date). He is also Vice
President - Finance and Chief Financial Officer of the Franklin Real Estate
Income Fund, Franklin Select Real Estate Income Fund and Franklin Advantage Real
Estate Income Fund (1993 to date). From 1983 to 1991 he was Director Portfolio
Management and Controller of the General Partner and Franklin Properties, Inc.
Previous to his employment with the General Partner he was associated with
Genstar Corporation as Supervisor - Internal Audit from 1980 to 1983 and with
Deloitte Haskins & Sells as an auditor from 1978 to 1980. He received a B.S.
degree in Accounting from the University of Illinois. Mr. TenBoer is a Certified
Public Accountant and a real estate broker.
David P. Rath, age 47, has served since 1992 as the Vice President Asset
Management for the General Partner, Franklin Properties, Inc. Previously, he was
Assistant Vice President - Research and Analysis for Franklin Properties, Inc.
Mr. Rath operated his own real estate investment company, Rath Investments, from
1987 to 1990. From 1980 to 1987, he was a partner with Edgewood Holdings
Corporation which acquired, managed and disposed of U.S. investment real estate
for foreign clients. From 1972 to 1980, Mr. Rath worked for the Dailey Mortgage
Company, Bank of America and Redwood Bank and focused on mortgage banking, real
estate investment trust advisory services and construction lending,
respectively. Mr. Rath received a B.S. degree in Mechanical Engineering from
Bucknell University and an Masters degree in Business Administration from the
University of California at Berkeley Graduate School of Business.
Item 10. Directors and Executive Officers Of The Company And The Advisor
(Continued)
David N. Popelka, age 43, has served since 1992 as Vice President Asset
Management for the General Partner, Franklin Properties, Inc. Prior to joining
the General Partner, Mr. Popelka was Vice President - Portfolio Management for
the Glenborough Management Company in Redwood City, California. Mr. Popelka is a
graduate of Illinois State University and received a Masters degree in Business
Administration from the University of Washington Graduate School of Business. He
has been a guest lecturer on real estate investments and finance at Golden Gate
University. Mr. Popelka is a real estate broker licensed by the State of
California.
Thomas J. Bennett, age 47, has served since 1988 as the President of
Continental and since 1989 as sole Director and Chief Financial Officer of
Continental. Previously, he served as Regional Vice President, Utah Region, of
Continental. From 1983 to 1986, Mr. Bennett was employed as Senior Property
Manager with Prowswood Ltd., in Utah, and the Irvine Company, Irvine,
California. He is a graduate of California State University at Long Beach and is
a Certified Property Manager of the Institute of Real Estate Management.
Charles L. Gee, age 49, has served since 1991 as the Senior Vice
President of Continental and as Secretary of Continental since 1989. From 1986
to 1991, he held the office of Vice President for Continental. Mr. Gee was
previously the Director of Operations for Prometheus Management Group of San
Mateo, a real estate management firm (1983 to 1985). From 1979 to 1983, he was
employed by two other real estate companies in the San Francisco Bay Area. Mr.
Gee is a Certified Property Manager by the Institute of Real Estate Management.
Item 11. Executive Compensation
The Partnership is a limited partnership and has no officers or directors who
were paid any direct remuneration. As discussed in Item 13 below, however, the
Partnership is managed by its General Partner and does pay for various services
provided by the General Partner.
Item 12. Security Ownership Of Certain Beneficial Owners And Management
As of December 31, 1995, no person is known by the Registrant to own
beneficially, more than five percent (5%) of the Units.
The Partnership is a limited partnership and has no officers or directors. As of
December 31, 1995, no director, officer or employee of the General Partner,
performing functions similar to those of an officer, beneficially owned, either
directly or indirectly, any partnership units.
Item 13. Certain Relationships And Related Transactions
The Partnership pays fees for various services provided by the General Partner
to the Partnership. In connection with the formation of the Partnership,
Property Resources, Inc. contributed $3,000 to the capital of the Partnership.
Property Resources, Inc. will receive compensation in the following amounts for
the following services rendered (capitalized terms are defined in the
Certificate and Agreements of Limited Partnership as set forth in the Prospectus
filed with the Securities and Exchange Commission pursuant to Rule 424(b) and
are incorporated herein by reference):
Item 13. Certain Relationships and Related Transactions (Continued)
1. For management of the Partnership properties, Continental Property
Management Co. (CPMC), an affiliate of Property Resources, Inc., is entitled to
receive a monthly management fee equal to 5% of the monthly collected gross
revenues. However, such amounts are not to exceed the prevailing rates for
comparable services in the localities where the properties are located. In 1995,
property management fees of $96,000 were accrued or paid to CPMC.
2. As compensation for its services in managing the Partnership, Property
Resources, Inc. is entitled to receive partnership management fees equal to 5%
of the Adjusted Funds Provided by Operations After Debt Service. In 1995, no
partnership management fees were paid to Property Resources, Inc.
3. As compensation to the General Partner in connection with the sale of
the Partnership properties, the General Partner is entitled to receive a
Subordinated Real Estate Commission from the Partnership. The Subordinated Real
Estate Commission shall not exceed the lesser of (i) a percentage of the gross
sales price of the property sold equal to one-half of the normal competitive
rate charged for similar services by unaffiliated parties that render such
services as an ongoing public activity in the same geographic location for
comparable property; or (ii) three percent (3%) of the gross sales price of the
property. The payment of the commission is also subject to other requirements as
set forth in Paragraph 9.5 of the Limited Partnership Agreement. The payment of
the Subordinated Real Estate Commission shall be made only after the Limited
Partners receive an aggregate amount, in cash, which when added to prior
Distributions, equal (i) to the total Original Invested Capital of the Limited
Partners plus (ii) a per annum return on their Adjusted Invested Capital equal
to six percent (6%) in the Partnership's first calendar year or a portion
thereof, increasing annually in an amount of one percent (1%) until it reaches
the rate of ten percent (10%) in the fifth year, then ten percent (10%) per
annum thereafter, commencing at the time each original Limited Partner is
admitted to the Partnership. In 1995, no Subordinated Real Estate Commissions
were paid to the General Partner.
4. As additional compensation for services rendered in connection with the
management and operation of the Partnership, the General Partner shall be
entitled to receive a Subordinated Incentive Fee equal to 15% of the Cash From
Sales or Refinancing remaining after the Partnership has distributed to the
Limited Partners an aggregate amount which when added to prior Distributions to
Holders is equal to: (i) the total of Original Invested Capital plus (ii) a per
annum return on their Adjusted Invested Capital equal to 6% in the Partnership's
first calendar year or portion thereof, increasing annually in an amount of 1%
until it reaches a rate of 10% in the fifth year, then 10% per annum thereafter,
commencing at the time each original Limited Partner is admitted to the
Partnership. No Incentive Fees were paid to the General Partner in 1995.
5. Net Income and Net Loss of the Partnership is allocated 5% to the
General Partner and 95% to the Limited Partners.
6. Under the Limited Partnership Agreement, the General Partner may
receive reimbursement for certain expenses incurred on behalf of the
Partnership. In 1995, the General Partner was reimbursed $44,000 for accounting
and data processing costs and services provided to the Partnership.
Item 13. Certain Relationships and Related Transactions (Continued)
Advances from the General Partner at December 31, 1995, totaled $506,000 plus
accrued interest of $493,000. Interest on advances is accrued at the prime rate,
ranging between 8.5% and 9% during 1995. The advances are due on demand.
Interest expense on advances for the year ended December 31, 1995 was $59,000.
A promissory note with Franklin Resources, Inc., an affiliate of the General
Partner, is collateralized by the Clearlake Village Apartments. As of December
31, 1995, the outstanding principal balance amounted to $1,711,000. The note is
payable in monthly installments of $16,099 including principal and interest at
10.50% to June, 2001, when the entire unpaid principal balance is due. Interest
expense on the promissory note for the year ended December 31, 1995 was
$180,000.
The Partnership has not issued any warrants, options or rights to purchase its
securities. No officer or member of management of the General Partner is
indebted to the Partnership. There were no transactions in which any of the
following persons had or is to have a direct or indirect material interest other
than that set forth above: (i) any officer, director or nominee for election as
director of the General Partner; (ii) any security holder owning more than 5% of
the Partnership's securities; or (iii) any relative or spouse of any of the
foregoing persons, or any relative to such spouse, who has the same home as such
person or who is a director or officer of the General Partner of the
Partnership.
PART IV
Item 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K
(a) 1. The financial statements and schedules of the Partnership
included in Item 8 of the report are listed on the index on page 13.
2. The supplemental financial statement schedule of the Partnership
included in Item 8 of this report is listed on the index on page 13.
3. Exhibits:
(3) Partnership Agreement1
(10) Material contracts2
Franklin Resources, Inc. Promissory Note
1Documents were filed in the Partnership's Form S-11 Registration
Statement (Registration No. 2-77330) and are incorporated herein by
reference.
2Documents were filed on Form 8, dated December 30, 1993, and are
incorporated herein by reference.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the quarter
ended December, 31, 1995.
SIGNATURE
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.
PROPERTY RESOURCES FUND VI
(Registrant)
Date: March 28, 1996 By: /s/ David P. Goss
------------------------ ------------------
David P. Goss
Chief Executive 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.
Signature Title Date
Chief Executive
/s/ David P. Goss Officer March 28, 1996
- ----------------------- -------------------
David P. Goss
/s/ Charles B. Johnson Director March 26, 1996
- ----------------------- -------------------
Charles B. Johnson
/s/ Rupert H. Johnson Director March 26, 1996
- ----------------------- -------------------
Rupert H. Johnson, Jr.
/s/ Charles E. Johnson Director March 26, 1996
- ----------------------- -------------------
Charles E. Johnson
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
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