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, 1997. Commission File No. 2-77330
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PROPERTY RESOURCES FUND VI
(Exact Name of Registrant as Specified in its Charter)
California 942838890
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(State or other jurisdiction or (I.R.S. Employer Identification
incorporation or organization) number)
P.O. Box 7777, San Mateo, CA (650) 312-5824
94403-7777
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(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, 1997: 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, 1997, 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 San Antonio, Texas; Salt Lake City, Utah and Campbell,
California.
Management is currently marketing the remaining properties for sale, and a
sale of one or both of the properties may occur in 1998.
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. 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. 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.
The properties are managed by Continental Property Management Co. ("CPMC"),
an affiliate of the General Partner, which performs the 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 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, 1997, monthly rental rates ranged from $400 to $550
and the occupancy rate was 92%. Amenities for residents include a 4,000
square foot clubhouse/exercise room, as well as a swimming pool, laundry, and
storage facilities. The secured loan is owed to an unaffiliated party,
carries interest at 8.875% and matures in 2006.
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, 1997, monthly rental rates
ranged from $370 to $500 per unit and the occupancy rate was 93%. A loan
secured by the property was negotiated in 1994 with a fixed interest rate of
9.96% , amortized on a 30-year schedule. The Note has an original principal
balance of $3,884,000 and it matures on October 1, 1999.
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, 1997, 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, 1997, 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 as of and for
the years ended, December 31, 1997, 1996, 1995, 1994 and 1993. 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>
(Dollars in Thousands,
except per unit amounts) 1997 1996 1995 1994 1993
- -------------------------------- ---------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Total revenue $2,122 $2,039 $2,178 $2,614 $2,275
Gain on note restructure - - - $272 -
Net income (loss) $455 $330 $430 $663 $(185)
Net income (loss) per unit1 $20.01 $14.50 $18.95 $29.56 $(8.15)
Number of limited partnership
units outstanding 21,585 21,585 21,585 21,585 21,585
Balance sheet data:
Total assets $7,661 $7,809 $7,696 $7,960 $9,848
Notes payable $6,559 $6,986 $6,942 $7,363 $10,108
Accumulated partners' capital
(deficit) $326 $(129) $(459) $(889) $1,552
Other Data:
Cash Flows
Operating $827 $466 $826 $545 $164
Investing $(117) $4 $14 $289 $(26)
Financing $(580) $(442) $(720) $(819) $(77)
Total rentable square footage
at the end of period: 321,104 321,104 321,104 321,104 423,519
Number of properties at end of
period 2 2 2 2 4
- ------------------------------
</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, 1997 TO YEAR ENDED DECEMBER 31, 1996.
Net income for the year ended December 31, 1997 increased $125,000 (38%) as
compared to the prior year, primarily due to an increase in average rental
rates, as discussed below.
Total revenues increased $83,000 (4%) in the year ended December 31, 1997 to
$2,122,000, as compared to $2,039,000 for the year ended December 31, 1996.
Rental revenues increased at both properties, primarily as a result of
increased average rental rates. The average occupancy rates remained
relatively stable. The average occupancy rates for each of the properties in
1997 and 1996 respectively, were 94% and 93% at Grouse Run and 93% and 94% at
Clearlake.
Total expenses decreased $42,000 (2%) in 1997, as compared to 1996. This was
due to a decline in operating expenses of $23,000 and decreasing total
interest expenses. The decline in operating expenses was mainly a result of
lower utility and repair costs at the two apartment complexes. Interest
expense (including related party interest payments) declined $21,000 as a
result of the Partnership's payments to reduce debt in 1997. Interest
payments of $4,000 were charged to related party expense in 1997, compared to
$141,000 in 1996 (see note 2 to the Consolidated Financial Statements).
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995.
Net income for the year ended December 31, 1996 was $330,000, a decrease of
$100,000 as compared to net income of $430,000 in 1995. The decrease in net
income was primarily a result of the end of the lease back period of Space
Savers One and Three in June 1995 and other factors as more fully described
below.
Total revenue for the year ended December 31, 1996, decreased $139,000, or
6%, compared to 1995 primarily as a result of the reduced revenues after the
end of the lease back period of a tenant of $245,000 which was partially
offset by an increase in rental revenue at the remaining two properties of
the Partnership of $78,000. The increase in rental revenue at the
Partnership's two remaining properties resulted from an increase in the
rental rates at the properties and to an increase in the average occupancy
rate at the Grouse Run Apartments. The average occupancy rate at the Grouse
Run Apartments increased from 89% in 1995 to 93% in 1996. Clearlake Village
Apartment's average occupancy rate remained at 94%. In addition, interest
revenue decreased $6,000 due to the reduced balance of the note receivable.
Total expenses for the year ended December 31, 1996, decreased $39,000, or
2%, from $1,748,000 in 1995 to $1,709,000 in 1996. The decrease in total
expenses in 1996 was primarily attributable to a decrease in related party
expenses of $125,000 as a result of a decrease in accounting and data
processing expenses, interest earned on advances due to the reduced balance
of advances from the General Partner and interest earned on the note payable
to affiliate due to the note being paid off in August, 1996. Interest
expense increased $82,000 in 1996 as a result of the note payable to
affiliate being paid in full from the proceeds of a new loan from an
unaffiliated lender.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Partnership had two operating properties:
Clearlake Village Apartments, and Grouse Run Apartments. The Partnership owns
fee interests in the buildings and the land upon which the buildings are
located, and all Partnership properties are subject to mortgages, as more
fully described in Note 3 to the consolidated financial statements included
in Item 8.
As of December 31, 1997, cash and cash equivalents totaled $409,000. As of
December 31, 1997, the Partnership owed accrued interest of $527,000, to the
General Partner on advances that were made to pay for various capital
improvements and to support operating cash flow deficits. Although these
advances were fully repaid in 1997, 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 any long-term capital
commitments and operating requirements.
On August 12, 1996, the note payable to affiliate, collateralized by the
Clearlake Village Apartments, was repaid from the proceeds of a new loan from
an unaffiliated lender. In connection with the new loan, the Partnership
formed Property Resources Fund VI Subsidiary, L.P. (the "Subsidiary") and
contributed its fee interest in Clearlake Village Apartments to the
Subsidiary. Although the General Partner of the Partnership is a 1% sole
General Partner in the Subsidiary, the partnership agreement of the
Subsidiary is structured such that no economic benefit accrues to the General
Partner as a result of the asset contribution. Accordingly, the minority
interest of the Subsidiary's General Partner has not been accounted for in
the accompanying consolidated financial statements.
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 the
property or a loan refinancing. Furthermore, management is currently
marketing the properties for sale, and a sale of one or both of the
properties may occur as early as 1998.
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.
YEAR 2000
The Partnership is in the process of assessing the impact of Year 2000 issues
on its computer systems and applications. At this time the Partnership
believes that the costs associated with resolving these issues will not have
a material effect on the financial statements.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PAGE
Report of Independent Accountants 9
Consolidated Balance Sheets as of December 31, 1997 and 1996 10
Consolidated Statements of Income for the Years 11
Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Partners' Capital (Deficit) for the 12
Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years 13
Ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements 14 - 18
Schedule III - Real Estate and Accumulated 19 - 20
Depreciation
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 accompanying consolidated balance sheets of Property
Resources Fund VI as of December 31, 1997 and 1996, the related consolidated
statements of income, partners' capital (deficit), and cash flows for each of
the three years in the period ended December 31, 1997, and the financial
statement schedule of Real Estate and Accumulated Depreciation. These
financial statements and the financial statement schedule are the
responsibility of Property Resources Fund VI management. Our responsibility
is to express an opinion on these financial statements and the 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 consolidated statements referred to above present fairly,
in all material respects, the financial position of Property Resources Fund
VI as of December 31, 1997 and 1996, and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1997, 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 26, 1998
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(Dollars in thousands) 1997 1996
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ASSETS:
Real estate:
Land $2,239 $2,239
Land improvements 781 763
Buildings and improvements 7,347 7,174
Furnishings and equipment 1,050 1,041
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11,417 11,217
Less: accumulated depreciation 4,708 4,420
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Total real estate, net 6,709 6,797
Cash and cash equivalents 409 279
Note receivable 237 320
Other assets, net 308 413
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Total assets $7,661 $7,809
================================================================================
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT):
Liabilities:
Notes payable $6,559 $6,986
Advances from General Partner - 153
Accrued interest due to General Partner 527 524
Deposits and other liabilities 249 275
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Total liabilities 7,335 7,938
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Partners' capital (deficit):
Limited partners, 21,585 units issued and 766 334
outstanding
General Partner (440) (463)
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Total partners' capital (deficit) 326 (129)
================================================================================
Total liabilities and partners' capital $7,661 $7,809
(deficit)
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in thousands, except per unit amounts) 1997 1996 1995
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REVENUES:
Rent $2,088 $2,000 $2,133
Interest and dividends 34 39 45
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Total revenues 2,122 2,039 2,178
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EXPENSES:
Interest, other than related party 204 88 6
Depreciation 288 291 287
Property Operating 1,032 1,055 1,054
Related party 126 254 379
General and administrative 17 21 22
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Total expenses 1,667 1,709 1,748
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NET INCOME $455 $330 $430
================================================================================
Net income allocable to limited partners $432 $313 $409
================================================================================
Net income allocable to General Partner $23 $17 $21
================================================================================
Net income per $500 limited partnership unit-based
on 21,585 units outstanding $20.01 $14.50 $18.95
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
LIMITED PARTNERS General
(Dollars in thousands) Units Amount Partner Total
- --------------------------------------------------------------------------------
Balance, January 1, 1995 21,585 $(388) $(501) $(889)
Net income - 409 21 430
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Balance, December 31, 1995 21,585 21 (480) (459)
Net income - 313 17 330
- --------------------------------------------------------------------------------
Balance, December 31, 1996 21,585 334 (463) (129)
Net income - 432 23 455
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Balance, December 31, 1997 21,585 $766 $(440) $326
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
Net income $455 $330 $430
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 301 304 293
Decrease (increase) in other assets 94 (260) 77
Increase in accrued interest 3 31 58
(Decrease) increase in deposits
and other liabilities (26) 61 (32)
- --------------------------------------------------------------------------------
Net cash provided by operating activities 827 466 826
Improvements to rental property (200) (58) (97)
Principal payments on note receivable 83 62 111
- --------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (117) 4 14
Proceeds from note payable - 2,167 -
Increase in deferred loan costs - (133) -
Principal payments on notes payable (427) (2,123) (421)
Payments to General Partner (153) (353) (299)
- --------------------------------------------------------------------------------
Net cash used in financing activities (580) (442) (720)
- --------------------------------------------------------------------------------
Net increase in cash and cash equivalents 130 28 120
Cash and cash equivalents,
beginning of year 279 251 131
- --------------------------------------------------------------------------------
Cash and cash equivalents,
end of year $409 $279 $251
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
As of December 31, 1997, 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, 1997, the Partnership owned garden-style apartment rental
properties aggregating 418 units including Clearlake Village Apartments,
located in Houston, Texas, and Grouse Run Apartments, located in Oklahoma
City, Oklahoma. As discussed in Note 3, the fee interest in Clearlake
Village Apartments is held through the Partnership's consolidated subsidiary,
Property Resources Fund VI Subsidiary, L.P. (the "Subsidiary").
Management is currently marketing the properties for sale, and a sale of one
or both of the properties may occur as early as 1998.
SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Partnership and its majority-owned Subsidiary (Note 3). All significant
intercompany accounts and transactions have been eliminated.
ESTIMATES
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.
REAL ESTATE
Real estate is stated at cost, adjusted for write-downs for impairment, 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 and repairs are charged to expense when incurred.
Pursuant to the Company's historical investment objectives, property
purchased has been 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 analyses include
consideration of estimated undiscounted future cash flows during the expected
holding period in comparison with carrying values, prevailing market
conditions and other economic matters. In 1986 and 1987, the Partnership
recorded reductions in the carrying amounts of Clearlake Village Apartments
and Grouse Run Apartments to state the
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
carrying amounts at fair value at the date of the adjustments. Management
currently intends to dispose of the rental properties and, in that regard,
expects to commence marketing activity in 1998. As of December 31, 1997,
management believes that the net realizable value exceeds the current
carrying amount; however, there can be no assurance that the eventual sale of
the rental properties, which may occur in the forthcoming year, will not
result in additional losses.
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 consolidated financial statements.
OTHER ASSETS
Other assets include deferred loan fees that are amortized over the life of
the related loan, which approximates the effective interest method. At
December 31, 1997, other assets also included impound accounts held by the
lender of the note payable collateralized by the Clearlake Village Apartments
for real estate taxes, insurance and capital improvements.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Partnership to
concentrations of credit risk consist principally of a note receivable and
money market securities. As of December 31, 1997, payments on the note
receivable are current.
The Partnership places excess cash in money market securities 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 reserves for potential credit losses, as appropriate, and
such losses have been within management's expectations.
REVENUE RECOGNITION
The properties are leased to tenants under short-term operating leases for
typically six to twelve month periods. Revenue is recognized as earned.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - NOTE RECEIVABLE
The note receivable is secured on a second deed of trust on a property
formerly owned by the Partnership and requires monthly principal and interest
payments of $9,863 until maturity on November 15, 1999.
NOTE 3 - NOTES PAYABLE
IN THOUSANDS 1997 1996
- ----------------------------------------------------------------------------
CLEARLAKE VILLAGE APARTMENTS
Note payable, collateralized by deed of trust,
bearing interest at a fixed rate of 8.875%, monthly
principal and interest payments of $17,571 until $2,143 $2,162
maturity in 2006.
GROUSE RUN APARTMENTS
Amended note payable, collateralized by deed of
trust,
bearing interest at a fixed rate of 9.96%, monthly
principal $4,416 4,824
payments of $33,970 until maturity in 1999.
-----------------------
$6,559 $6,986
=======================
On August 12, 1996, the note payable to affiliate, collateralized by the
Clearlake Village Apartments, was repaid from the proceeds of a new loan from
an unaffiliated lender. In connection with the new loan, the Partnership
formed Property Resources Fund VI Subsidiary, L.P. (the "Subsidiary") and
contributed its fee interest in Clearlake Village Apartments to the
Subsidiary. Although the General Partner of the Partnership is a 1% sole
General Partner in the Subsidiary, the partnership agreement of the
Subsidiary is structured such that no economic benefit accrues to the General
Partner as a result of the asset contribution. Accordingly, the minority
interest of the Subsidiary's General Partner has not been accounted for in
the accompanying consolidated financial statements.
On October 1, 1994, the Grouse Run note payable was amended. The amendment
was accounted for 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.
Aggregate principal payments required in future years are as follows:
(Dollars in thousands)
1998 $429
1999 4,032
2000 26
2001 28
2002 31
Thereafter 2,013
- ------------------------------------------------
$6,559
================================================
Interest paid on notes payable for the years ended December 31, 1997, 1996
and 1995, was $191,000, $169,000, and $179,000, respectively.
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - DISTRIBUTION OF INCOME
ALLOCATIONS TO PARTNERS
The limited partnership agreement provides for the following
allocations to partners:
Cash available for distribution from operations, as defined, is 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 are allocated 95% to the limited
partners in the ratio of their capital contributions and 5% to the
General Partner.
Net proceeds from the refinancing of debt or sale of partnership property
are 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 are allocated 85% to the limited
partners and 15% to the General Partner.
NOTE 5 - TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
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
summarized as follows.
(Dollars in thousands) 1997 1996 1995
- -----------------------------------------------------------------------------
Property management fees,
charged to related party expense $104 $99 $96
Reimbursement for accounting
and data processing expenses,
charged to related party expense $18 $14 $44
Interest on advances from the General Partner,
charged to related party expense $4 $30 $59
Interest on promissory note collateralized by
the property Clearlake Village Apartments,
charged to related party expense - $111 $180
PROPERTY RESOURCES FUND VI
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES (CONTINUED)
A promissory note payable to Franklin Resources, Inc., the parent of the
General Partner, which was collateralized by the Clearlake Village Apartments
was repaid on August 12, 1996 from the proceeds of a new loan from an
unaffiliated lender (Note 3).
INTEREST DUE FROM GENERAL PARTNER
As of December 31, 1997, accrued interest due to the General Partner was
$527,000. This was accrued on advances that were required to pay for various
capital improvements and to support operating cash flow deficits. The
principal portion of the advances were fully repaid in 1997. 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 6 - 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:
- -------------------------------------------------------------------------------
(Dollars in thousands) 1997 1996 1995
- -------------------------------------------------------------------------------
Net income - financial statements $455 $330 $430
Differences resulting from:
Depreciation (54) (53) (106)
Interest expense (374) (374) (475)
Amortization of capitalized interest
on debt restructuring - - -
Gain on disposition of property 48 36 65
Gain on restructuring of note - - -
Other - (32) -
- -------------------------------------------------------------------------------
Net income (loss) income tax method $75 $(93) $(86)
===============================================================================
Net taxable income (loss) per limited
partnership unit and net of amounts
allocable to the General Partner $3.50 $(4.33) $(3.66)
===============================================================================
RESTATED
- -------------------------------------------------------------------------------
(Dollars in thousands) 1997 1996 1995
- -------------------------------------------------------------------------------
Partners' capital (deficit) - financial $326 $(129) $(459)
statements
Differences resulting from:
Depreciation (4,965) (4,911) (4,853)
Interest Expense (1,223) (849) (473)
Gain on disposition of property (138) (186) (222)
Write-down on rental property 1,452 1,452 1,452
Note restructuring 2,028 2,028 2,028
Note restructuring basis adjustment (2,305) (2,305) (2,285)
===============================================================================
Partners' capital (deficit) income tax method $(4,825) $(4,900) $(4,802)
===============================================================================
<TABLE>
<CAPTION>
PROPERTY RESOURCES FUND VI
SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION
AS OF, AND FOR THE YEAR ENDED DECEMBER 31,
1997
(Dollars in thousands)
Cost Capitalized
Initial Subsequent To Gross Amount at Which
COST TO FUND ACQUISITION CARRIED AT CLOSE OF PERIOD
Life on Which
Depreciation in
Accum- Latest Operations
Carry- Buildings ulated Date of Statement is
Encum- Improve- ing and Deprecia- construc- Date Computed
Description brances Land Buildings ments Costs Land Improvements Total tion tion Acquired
174 unit apartment
complex in Houston,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Texas $2,143 $999 $3,662 $436 - $999 $2,872 $3,871 $1,827 1976 08/82 Note 2
244 unit apartment
complex Oklahoma
City, Oklahoma 4,416 1,240 6,562 635 - 1,240 6,306 7,546 2,881 1984 07/84 Note 2
- -------------------- --------- --------- --------- ---------- ------- ------- ------------ ------------- --------- -------- --------
$6,559 $2,239 $10,224 $1,071 - $2,239 $9,178 $11,417 $4,708
Note 1 Note 3 Note 5
Note 4
==================== ========= ========= ========= ========== ======= ======= ============ ============= ========= ======== ========
</TABLE>
R E A L E S T A T E A N D A C C U M U L A T E D D E P R E C I A T I O N
NOTES:
(1) The aggregate cost for federal income tax purposes is $12,869
(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
1997 1996 1995
--------------------------------
Balance at beginning of period $11,217 $11,159 $11,062
Additions during period:
Improvements 200 58 97
--------------------------------
Balance at end of period $11,417 $11,217 $11,159
================================
(5) RECONCILIATION OF ACCUMULATED DEPRECIATION
------------------------------------------
1997 1996 1995
--------------------------------
Balance at beginning of period $4,420 $4,128 $3,841
Dispositions - - -
Depreciation expense for the 288 292 287
period
--------------------------------
Balance at end of period $4,708 $4,420 $4,128
================================
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
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
DAVID P. GOSS, age 50, is Chief Executive Officer, President and Director
of the General Partner (1987 to date). He is also Chief Executive Officer,
President and Director of Property Resources Equity Trust (1987 to date),
Franklin Properties, Inc. (1988 to date) and Franklin Select Realty Trust (1989
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.
CHARLES B. JOHNSON, age 65, 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 Director
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.
RUPERT H. JOHNSON, JR., age 57, 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 41, 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.
RICHARD S. BARONE, age 47, 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 and Franklin Select Realty
Trust (1989 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.
MARTIN L. FLANAGAN, age 37, 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, and
Chief Financial Officer 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 41, is Vice President - Asset Management for the
General Partner, Property Resources, Inc. (1991 to date). He is also Vice
President - Finance and Chief Financial Officer of Franklin Select Realty Trust
(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 49, has served since 1992 as the Vice President - Asset
Management for the General Partner, Property Resources, 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 a Masters degree in Business Administration from the
University of California at Berkeley Graduate School of Business.
DAVID N. POPELKA, age 45, has served since 1992 as Vice President - Asset
Management for the General Partner, Property Resources, 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 49, 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.
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, 1997, 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, 1996, 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):
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 1997,
property management fees of $104,000 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 1997, 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 1997, 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 1997.
5. Net income and net loss from operations 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
1997, the General Partner was reimbursed $18,000 for accounting and data
processing costs and services provided to the Partnership.
Advances from the General Partner at December 31, 1997, totaled $0 plus accrued
interest of $527,000, Interest on advances is accrued at the prime rate, which
was 8.25% from January to March of 1997 and was 8.5% for the remainder of the
year. Interest expense on advances for the year ended December 31, 1997 was
$4,000.
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 8.
2. The supplemental financial statement schedule of the Partnership
included in Item 8 of this report is listed on the index on page 8.
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, 1997.
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: By: -------------------------------
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
/s/ David P. Goss Chief Executive Officer
- ----------------------- -------------------
David P. Goss
/s/ Charles B. Johnson Director
- ----------------------- -------------------
Charles B. Johnson
/s/ Rupert H. Johnson, Jr. Director
- ----------------------- -------------------
Rupert H. Johnson, Jr.
/s/ Charles E. Johnson Director
- ----------------------- -------------------
Charles E. Johnson
