UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
-----
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: SEPTEMBER 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
Commission File Number: 0-13129
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 04-2829686
(State of organization) (I.R.S. Employer
Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 439-8118
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
----
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
----
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
Documents Incorporated by Reference
Documents Form 10-K Reference
--------- -------------------
Prospectus of registrant dated Part IV
September 17, 1984, as supplemented
<PAGE>
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
1996 FORM 10-K
TABLE OF CONTENTS
Part I Page
Item 1 Business I-1
Item 2 Properties I-3
Item 3 Legal Proceedings I-3
Item 4 Submission of Matters to a Vote of Security Holders I-4
Part II
Item 5 Market for the Partnership's Limited Partnership
Interests and Related Security Holder Matters II-1
Item 6 Selected Financial Data II-1
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations II-2
Item 8 Financial Statements and Supplementary Data II-5
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure II-5
Part III
Item 10 Directors and Executive Officers of the Partnership III-1
Item 11 Executive Compensation III-3
Item 12 Security Ownership of Certain Beneficial Owners and
Management III-3
Item 13 Certain Relationships and Related Transactions III-3
Part IV
Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K IV-1
Signatures IV-2
Index to Exhibits IV-3
Financial Statements and Supplementary Data F-1 to F-31
<PAGE>
PART I
Item 1. Business
Paine Webber Income Properties Six Limited Partnership (the "Partnership")
is a limited partnership formed in April 1984 under the Uniform Limited
Partnership Act of the State of Delaware for the purpose of investing in a
diversified portfolio of existing income-producing operating properties such as
apartments, shopping centers, office buildings, and other similar
income-producing properties. The Partnership sold $60,000,000 in Limited
Partnership units (the "Units"), representing 60,000 units at $1,000 per Unit,
from September 17, 1984 to September 16, 1985 pursuant to a Registration
Statement filed on Form S-11 under the Securities Act of 1933 (Registration No.
2-91080). Limited Partners will not be required to make any additional
contributions.
The Partnership originally invested the net proceeds of the public
offering, through joint venture partnerships, in five operating properties. As
discussed further below, through September 30, 1996 one of the Partnership's
original investments had been sold and another investment had been lost though
foreclosure proceedings. As of September 30, 1996, the Partnership owned,
through joint venture partnerships, interests in the operating properties set
forth in the following table:
Name of Joint Venture Date of
Name and Type of Property Acquisition of Type of
Location Size Interest Ownership (1)
- ---------------------------- ---- ---------- -----------------------
Regent's Walk Associates 255 5/15/85 Fee ownership of land and
Regent's Walk Apartments units improvements (through
Overland Park, Kansas joint venture)
Kentucky-Hurstbourne 409 7/25/85 Fee ownership of land and
Associates units improvements (through
Hurstbourne Apartments joint venture)
Louisville, Kentucky
Gwinnett Mall Corners 304,000 8/28/85 Fee ownership of land and
Associates gross improvements (through
Mall Corners Shopping Center leasable joint venture)
Gwinnett County, Georgia sq. ft.
(1) See Notes to the Financial Statements filed with this Annual Report for a
description of the long-term mortgage indebtedness secured by the
Partnership's operating property investments and for a description of the
agreements through which the Partnership has acquired these real estate
investments.
The Partnership previously owned an interest in Bailey N. Y. Associates, a
joint venture which owned the 150 Broadway Office Building; a 238,000 square
foot office and retail building located in New York City. The Partnership sold
its interest in the Bailey N. Y. Associates joint venture on September 22, 1989
for cash totalling $4,000,000 and a second mortgage note receivable in the
amount of $14,000,000. Due to a deterioration in the commercial real estate
market in New York City, which adversely impacted property operations, the owner
of the 150 Broadway Office Building defaulted on its mortgage loan obligations
during fiscal 1990 and filed for bankruptcy protection in July 1991. During
fiscal 1993, the Partnership reached a settlement agreement involving both the
first mortgage lender and the owner. Under this agreement, which was approved by
the bankruptcy court and declared effective on June 15, 1993, the Partnership
agreed to restructure its second mortgage position. As discussed further in Item
7, during fiscal 1995 the Partnership agreed to assign its second mortgage
interest in the 150 Broadway Office Building to an affiliate of the borrower in
return for a payment of $400,000. Subsequently, the borrower was unable to
perform under the terms of this agreement and the Partnership agreed to reduce
the required cash compensation to $300,000. The Partnership received $200,000 of
the agreed upon sale proceeds during the second quarter of fiscal 1995. The
remaining $100,000 was funded into an escrow account on May 31, 1995, to be
released upon the resolution of certain matters between the borrower and the
first mortgage holder but in no event later than June 10, 1996. In April 1996,
the borrower and the first mortgage lender resolved their remaining issues and
released the $100,000 plus accrued interest to the Partnership. With the release
of the escrowed funds, the Partnership's interest in and any obligations related
to the 150 Broadway Office Building were terminated.
During fiscal 1992, the Partnership forfeited its interest in the
Northbridge Office Centre as a result of certain defaults under the terms of the
property's mortgage indebtedness. The mortgage lender took title to the
Northbridge property through foreclosure proceedings on April 20, 1992, after a
protracted period of negotiations failed to produce a mutually acceptable
restructuring agreement. Furthermore, the Partnership's efforts to recapitalize,
sell or refinance the property were unsuccessful. The inability of the
Northbridge joint venture to generate sufficient funds to meet its debt service
obligations resulted mainly from a significant oversupply of competing office
space in the West Palm Beach, Florida market. Management did not foresee any
near term improvement in such conditions and ultimately determined that it was
in the Partnership's best interests not to contest the lender's foreclosure
action.
The Partnership's original investment objectives were to:
(i) provide the Limited Partners with cash distributions which, to some
extent, will not constitute taxable income;
(ii) preserve and protect Limited Partners' capital;
(iii) achieve long-term appreciation in the value of its properties; and
(iv) provide a build up of equity through the reduction of mortgage loans
on its properties.
Through September 30, 1996, the Limited Partners had received cumulative
cash distributions from operations totalling approximately $14,502,000, or $252
per original $1,000 investment for the Partnership's earliest investors. A
substantial portion of the cash distributions paid to date has been sheltered
from current taxable income. The Partnership reinstated the payment of regular
quarterly cash distributions effective for the quarter ended June 30, 1994 at an
annualized rate of 2% on original invested capital. Distributions had been
discontinued in 1990 primarily due to the cash deficits associated with the
Partnership's two commercial properties, Northbridge Office Centre and the 150
Broadway Office Building, which investments have since been disposed of, as
discussed further above. As of September 30, 1996, the Partnership retains an
interest in three of its five original investment properties. However, the loss
of the investment in Northbridge, which represented 25% of the Partnership's
original investment portfolio, in all likelihood, will result in the
Partnership's inability to return the full amount of the original invested
capital to the Limited Partners. The amount of the original capital that will be
returned will depend upon the proceeds received from the final liquidation of
the remaining investments. The amount of such proceeds will ultimately depend
upon the value of the underlying investment properties at the time of their
final disposition, which cannot presently be determined. At the present time,
real estate values for retail shopping centers in certain markets are being
adversely impacted by the effects of overbuilding and consolidations among
retailers which have resulted in an oversupply of space. Currently, occupancy at
the Partnership's retail shopping center, located in the suburban Atlanta,
Georgia market, remains high, and operations to date do not appear to have been
affected by this general trend.
All of the properties securing the Partnership's investments are located
in real estate markets in which they face significant competition for the
revenues they generate. The apartment complexes compete with numerous projects
of similar type generally on the basis of price, location and amenities. As in
all markets, the apartment projects also compete with the local single family
home market for prospective tenants. The continued availability of low interest
rates on home mortgage loans has increased the level of this competition in all
parts of the country over the past several years. However, the impact of the
competition from the single-family home market has been offset by the lack of
significant new construction activity in the multi-family apartment market over
most of this period. In the past 12 months, development activity for
multi-family properties in many markets has escalated significantly. The
shopping center competes for long-term commercial tenants with numerous projects
of similar type generally on the basis of location, rental rates and tenant
improvement allowances.
The Partnership has no operating property investments located outside the
United States. The Partnership is engaged solely in the business of real estate
investment, therefore, presentation of information about industry segments is
not applicable.
The Partnership has no employees; it has, however, entered into an
Advisory Contract with PaineWebber Properties Incorporated (the "Adviser"),
which is responsible for the day-to-day operations of the Partnership. The
Adviser is a wholly-owned subsidiary of PaineWebber Incorporated ("PWI"), a
wholly owned subsidiary of PaineWebber Group, Inc. ("PaineWebber").
The General Partners of the Partnership (the "General Partners") are Sixth
Income Properties Fund, Inc. and Properties Associates 1985, L.P. Sixth Income
Properties Fund, Inc. (the "Managing General Partner"), a wholly-owned
subsidiary of PaineWebber, is the managing general partner of the Partnership.
The associate general partner of the Partnership is Properties Associates 1985,
L.P. (the "Associate General Partner"), a Virginia limited partnership, certain
limited partners of which are also officers of the Adviser and the Managing
General Partner. Subject to the Managing General Partner's overall authority,
the business of the Partnership is managed by the Adviser.
The terms of transactions between the Partnership and affiliates of the
Managing General Partner of the Partnership are set forth in Items 11 and 13
below to which reference is hereby made for a description of such terms and
transactions.
<PAGE>
Item 2. Properties
As of September 30, 1996, the Partnership owned interests in three
operating properties through joint venture partnerships. The joint venture
partnerships and the related properties are referred to under Item 1 above to
which reference is made for the name, location and description of each property.
Occupancy figures for each fiscal quarter during 1996, along with an
average for the year, are presented below for each property:
Percent Occupied At
------------------------------------------------
Fiscal
1996
12/31/95 3/31/96 6/30/96 9/30/96 Average
-------- ------- ------- ------- -------
Regent's Walk Apartments 99% 99% 99% 98% 98%
Hurstbourne Apartments 93% 93% 94% 96% 94%
Mall Corners Shopping Center 93% 94% 94% 90% 93%
Item 3. Legal Proceedings
In November 1994, a series of purported class actions (the "New York
Limited Partnership Actions") were filed in the United States District Court for
the Southern District of New York concerning PaineWebber Incorporated's sale and
sponsorship of various limited partnership investments, including those offered
by the Partnership. The lawsuits were brought against PaineWebber Incorporated
and Paine Webber Group, Inc. (together "PaineWebber"), among others, by
allegedly dissatisfied partnership investors. In March 1995, after the actions
were consolidated under the title In re PaineWebber Limited Partnership
Litigation, the plaintiffs amended their complaint to assert claims against a
variety of other defendants, including Sixth Income Properties Fund, Inc. and
Properties Associates 1985, L.P. ("PA1985"), which are the General Partners of
the Partnership and affiliates of PaineWebber. On May 30, 1995, the court
certified class action treatment of the claims asserted in the litigation.
The amended complaint in the New York Limited Partnership Actions alleged
that, in connection with the sale of interests in Paine Webber Income Properties
Six Limited Partnership, PaineWebber, Sixth Income Properties Fund, Inc. and
PA1985 (1) failed to provide adequate disclosure of the risks involved; (2) made
false and misleading representations about the safety of the investments and the
Partnership's anticipated performance; and (3) marketed the Partnership to
investors for whom such investments were not suitable. The plaintiffs, who
purported to be suing on behalf of all persons who invested in Paine Webber
Income Properties Six Limited Partnership, also alleged that following the sale
of the partnership interests, PaineWebber, Sixth Income Properties Fund, Inc.
and PA1985 misrepresented financial information about the Partnership's value
and performance. The amended complaint alleged that PaineWebber, Sixth Income
Properties Fund, Inc. and PA1985 violated the Racketeer Influenced and Corrupt
Organizations Act ("RICO") and the federal securities laws. The plaintiffs
sought unspecified damages, including reimbursement for all sums invested by
them in the partnerships, as well as disgorgement of all fees and other income
derived by PaineWebber from the limited partnerships. In addition, the
plaintiffs also sought treble damages under RICO.
In January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in the New York Limited Partnership Actions outlining the terms under
which the parties have agreed to settle the case. Pursuant to that memorandum of
understanding, PaineWebber irrevocably deposited $125 million into an escrow
fund under the supervision of the United States District Court for the Southern
District of New York to be used to resolve the litigation in accordance with a
definitive settlement agreement and plan of allocation. On July 17, 1996,
PaineWebber and the class plaintiffs submitted a definitive settlement agreement
which has been preliminarily approved by the court and provides for the complete
resolution of the class action litigation, including releases in favor of the
Partnership and the General Partners, and the allocation of the $125 million
settlement fund among investors in the various partnerships at issue in the
case. As part of the settlement, PaineWebber also agreed to provide class
members with certain financial guarantees relating to some of the partnerships.
The details of the settlement are described in a notice mailed directly to class
members at the direction of the court. A final hearing on the fairness of the
proposed settlement was held in December 1996, and a ruling by the court as a
result of this final hearing is currently pending.
In February 1996, approximately 150 plaintiffs filed an action entitled
Abbate v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiffs' purchases of various limited partnership interests, including those
offered by the Partnership. The complaint alleged, among other things, that
PaineWebber and its related entities committed fraud and misrepresentation and
breached fiduciary duties allegedly owed to the plaintiffs by selling or
promoting limited partnership investments that were unsuitable for the
plaintiffs and by overstating the benefits, understating the risks and failing
to state material facts concerning the investments. The complaint sought
compensatory damages of $15 million plus punitive damages against PaineWebber.
In June 1996, approximately 50 plaintiffs filed an action entitled
Bandrowski v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiff's purchases of various limited partnership interests, including those
offered by the Partnership. The complaint is substantially similar to the
complaint in the Abbate action described above, and sought compensatory damages
of $3.4 million plus punitive damages.
Mediation with respect to the Abbate and Bandrowski actions described above
was held in December 1996. As a result of such mediation, a tentative settlement
between PaineWebber and the plaintiffs was reached which would provide for
complete resolution of both actions. PaineWebber anticipates that releases and
dismissals with regard to these actions will be received by February 1997.
Under certain limited circumstances, pursuant to the Partnership Agreement
and other contractual obligations, PaineWebber affiliates could be entitled to
indemnification for expenses and liabilities in connection with the litigation
described above. However, PaineWebber has agreed not to seek indemnification for
any amounts it is required to pay in connection with the settlement of the New
York Limited Partnership Actions. At the present time, the General Partners
cannot estimate the impact, if any, of the potential indemnification claims on
the Partnership's financial statements, taken as a whole. Accordingly, no
provision for any liability which could result from the eventual outcome of
these matters has been made in the accompanying financial statements of the
Partnership.
The Partnership is not subject to any other material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and
Related Security Holder Matters
At September 30, 1996, there were 4,034 record holders of Units in the
Partnership. There is no public market for the resale of Units, and it is not
anticipated that a public market for Units will develop. The Managing General
Partner will not redeem or repurchase Units.
Reference is made to Item 6 below for a discussion of the amount of cash
distributions made to the Limited Partners during fiscal 1996.
Item 6. Selected Financial Data
Paine Webber Income Properties Six Limited Partnership
(In thousands, except per Unit data)
Years Ended September 30,
----------------------------------------------
1996 1995 1994 1993 1992(1)
---- ---- ---- ---- ----
Revenues $ 259 $ 361 $ 106 $ 47 $ 2,849
Operating loss $ (92) $ (60) $(1,302) $(2,412) $ (2,494)
Loss on transfer of
assets at foreclosure - - - - $(17,248)
Minority interest in
income of
consolidated venture - - - - $ (423)
Gain on sale of venture
interest - - - - $ 23
Partnership's share of
unconsolidated
ventures' income
(losses) $ 874 $ 322 $ 522 $ 581 $ (4)
Income (loss) before
extraordinary gain $ 782 $ 262 $ (780) $(1,831) $(20,146)
Extraordinary gain from
settlement of
debt obligation - - - - $ 29,842
Net income (loss) $ 782 $ 262 $ (780) $(1,831) $ 9,696
Per Limited Partnership Unit:
Income (loss) before
extraordinary gain $ 12.89 $ 4.33 $(12.86) $(30.20) $(332.22)
Extraordinary gain - - - - $ 492.13
Net income (loss) $ 12.89 $ 4.33 $(12.86) $(30.20) $ 159.91
Cash distributions
per Limited
Partnership Unit $ 20.00 $ 20.00 $ 5.00 - -
Total assets $ 8,658 $ 9,100 $10,036 $11,160 $ 13,044
(1) On April 20, 1992 the mortgage lender took title to the Northbridge Office
Centre through foreclosure proceedings. As a result the Partnership's fiscal
1992 net operating results reflect an extraordinary gain from the settlement
of the debt obligation and a loss on transfer of assets at foreclosure.
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Annual
Report.
The above per Limited Partnership Unit information is based upon the
60,000 Limited Partnership Units outstanding during each year.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership offered Units of Limited Partnership interests to the
public from September 17, 1984 to September 16, 1985 pursuant to a Registration
Statement filed under the Securities Act of 1933. Gross proceeds of $60,000,000
were received by the Partnership, and after deducting selling expenses and
offering costs, approximately $51,889,000 was originally invested in five
operating investment properties through joint ventures. As discussed further
below, the sale of the Partnership's remaining interest in the 150 Broadway
Office Building was finalized during fiscal 1996, and, as previously reported,
the Partnership's interest in the Northbridge Office Centre was lost through
foreclosure proceedings in fiscal 1992. As of September 30, 1996, the
Partnership had joint venture investments in three remaining operating
properties, which consist of one retail shopping center and two multi-family
apartment complexes. At the present time the Partnership does not have any
commitments for additional investments but may be called upon to fund its
portion of operating deficits or capital improvements of the joint ventures in
accordance with the respective joint venture agreements.
During the first quarter of fiscal 1996, the Mall Corners joint venture
obtained a new first mortgage loan with an initial principal balance of
$20,000,000 and repaid a maturing first mortgage loan which had a principal
balance of $17,246,000 at the time of the refinancing. The prior first mortgage
loan bore interest at 11.5% per annum. Excess loan proceeds were used to
establish certain required escrow deposits, including an amount of $1.7 million
designated to pay for certain planned improvements and an expansion of the
shopping center which added 18,000 square feet to the property's gross leasable
area and was completed during 1996. In addition, excess refinancing proceeds of
$550,000 were available to be distributed to the Partnership in accordance with
the joint venture agreement. However, the Partnership agreed to allow the joint
venture to retain a portion of such proceeds to pay for the leasing costs
incurred in connection with certain leases executed during the first quarter of
fiscal 1996. The new first mortgage loan has a 10-year term, bears interest at a
rate of approximately 7.4% per annum and requires monthly principal and interest
payments based on a 20-year amortization schedule. Despite the increase in the
loan principal balance, the annual debt service payments of the joint venture
have decreased slightly as a result of this refinancing due to the significant
reduction in the interest rate. At the present time, real estate values for
retail shopping centers in certain markets are being adversely impacted by the
effects of overbuilding and consolidations among retailers which have resulted
in an oversupply of space. Currently, occupancy at the Mall Corners Shopping
Center, located in the suburban Atlanta, Georgia market, remains high and
operations to date do not appear to have been affected by this general trend.
The occupancy at the Mall Corners Shopping Center averaged 93% for fiscal 1996,
unchanged from the previous year.
As result of the refinancing of the Mall Corners Shopping Center, the
recent completion of its planned expansion, and the release of escrowed funds
from the sale of the Partnership's interest in the 150 Broadway Office Building
note (as discussed further below), the Partnership expects to make a special
distribution on February 14, 1997 to Unitholders of record on December 31, 1996.
The Partnership anticipates distributing $2,040,000, or $34 per original $1,000
Unit. Of this amount, approximately $1,320,000 represents Partnership reserves
that had been previously set aside to cover the costs of the planned refinancing
of Mall Corners Shopping Center and to pay for its proposed expansion. These
costs and a reserve for other leasing improvements at Mall Corners were
eventually funded out of additional loan proceeds from the Mall Corners
refinancing in December 1995. Of the remainder, $300,000 represents the amount
received from the sale of the Partnership's interest in the 150 Broadway Office
Building note, as discussed further below, and $420,000 represents a
distribution of excess refinancing proceeds from the Mall Corners joint venture.
In addition, the Partnership expects to increase the annual distribution rate
from 2.0% to 3.6% on remaining invested capital. This adjustment would be
effective for the quarter ending March 31, 1997 and would be paid on May 15,
1997 on what would then be a $966 remaining portion of an original $1,000 per
Unit investment.
The Partnership's two multi-family apartment properties continued to
perform strongly in fiscal 1996, as evidenced by the occupancy levels which
remained in the mid-to-high 90% range for both properties. This performance was
achieved despite the competition from the single-family home market prompted by
the continued availability of low home mortgage interest rates. For the past
several years, the absence of significant new construction of multi-family
apartments more than offset the competition from the single-family home market
and allowed the oversupply of apartment units which existed in many markets as a
result of the overbuilding of the late 1980s to be absorbed. Over the past 12
months, development activity for multi-family properties in many markets has
escalated significantly. Neither Regent's Walk nor Hurstbourne has experienced
any significant increase in the supply of apartment units in their respective
sub-markets to date, but management continues to monitor this situation closely.
Should a substantial amount of new apartment development reach the planning
stages in these markets, it could prompt management to explore potential sales
opportunities for these properties if such development activity is expected to
limit future appreciation. The investment in the Mall Corners Shopping Center
currently provides the majority of the Partnership's net cash flow and would
likely be held pending the dispositions of the two multi-family properties.
Depending on the availability of favorable sales opportunities for the two
multi-family properties, the Partnership could be positioned for a possible
liquidation within the next 2-to-3 years. There are no assurances, however, that
the Partnership will be able to achieve the sale of its remaining assets within
this time frame.
As previously reported, during fiscal 1995 the Partnership refinanced the
9% first mortgage note secured by the Regent's Walk Apartments, which had a
principal balance of $8,390,000 and was scheduled to mature on May 1, 1995. The
new long-term debt consists of a first mortgage note with an initial principal
balance of $9,000,000 which bears interest at a fixed rate of 7.32% per annum.
Monthly payments of interest and principal, based on a 30-year amortization
schedule, are due through maturity on October 1, 2000. Because the debt service
on the prior loan called for interest-only payments, the venture's monthly debt
service did not change significantly as a result of the refinancing transaction
despite the decrease in the interest rate. In connection with the refinancing of
the Regent's Walk mortgage loan, $500,000 of the loan proceeds were deposited in
an escrow account to provide funds for the remodeling of kitchens and bathrooms
in the apartment units. It is anticipated that these improvements will be
completed over the next few years as new leases for the apartments are signed.
In accordance with the escrow agreement, the balance of the escrow account is
invested in bank certificates of deposit. The Regent's Walk Apartments averaged
98% occupancy for fiscal 1996, as compared to 97% for the prior year. The
occupancy level at the Hurstbourne Apartments averaged 94% during fiscal 1996 as
compared to an average of 93% achieved in fiscal 1995. Recent marketing efforts
have resulted in an increase in the number of potential tenants visiting the
Hurstbourne property. In addition, the property's management team has undertaken
a capital improvement program designed to make the apartment units more
attractive to these potential tenants.
As previously reported, during the quarter ended December 31, 1994 the
Partnership agreed to assign its second mortgage interest in the 150 Broadway
Office Building to an affiliate of the borrower in return for a payment of
$400,000. Subsequently, the borrower was unable to perform under the terms of
this agreement and the Partnership agreed to reduce the required cash
compensation to $300,000. During the quarter ended March 31, 1995, the
Partnership received $200,000 of the agreed upon sale proceeds. The remaining
$100,000 was funded into an escrow account on May 31, 1995, to be released upon
the resolution of certain matters between the borrower and the first mortgage
holder, but in no event later than June 10, 1996. The Partnership recorded
income of $200,000 in fiscal 1995 to reflect the non-refundable cash proceeds
received. During fiscal 1996, the borrower and the first mortgage lender
resolved their remaining issues and released the $100,000 plus accrued interest
to the Partnership. The $100,000 was recorded as income in fiscal 1996. With the
release of the escrowed funds, the Partnership's interest in and any obligations
related to the 150 Broadway Office Building were terminated.
At September 30, 1996, the Partnership had available cash and cash
equivalents of approximately $3,218,000. Such cash and cash equivalents will be
utilized for Partnership requirements such as the payment of operating expenses,
the funding of future operating deficits or capital improvements at the joint
ventures, if necessary, as required by the respective joint venture agreements,
and for distributions to the partners, as discussed further above. The source of
future liquidity and distributions to the partners is expected to be from cash
generated from the operations of the Partnership's income-producing investment
properties and proceeds from the sale or refinancing of the remaining investment
properties. Such sources are expected to be sufficient to meet the Partnership's
needs on both a short-term and long-term basis.
Results of Operations
1996 Compared to 1995
The Partnership reported net income of $782,000 for the year ended
September 30, 1996, as compared to net income of $262,000 for the prior year.
This favorable change in net income is primarily the result of an increase of
$552,000 in the Partnership's share of ventures' income. The increase in the
Partnership's share of ventures' income was partially offset by a decrease in
the income from the sale of the Partnership's second mortgage interest in the
150 Broadway Office Building. In fiscal 1995, the Partnership recorded income of
$200,000 to reflect cash proceeds related to the sale of the Partnership's
interest in the 150 Broadway Office Building which had been fully reserved for
in fiscal 1994. As discussed further above, during fiscal 1996 the Partnership
received, and recorded as income, the remaining $100,000 from the sale of the
150 Broadway interest.
<PAGE>
The increase in the Partnership's share of ventures' income was mainly due
to increases in rental revenues and a decrease in combined interest expense
which were partially offset by increases in property operating expenses. Rental
revenues from the Regent's Walk and Hurstbourne Apartments increased by 6% and
7%, respecetively, during fiscal 1996 due to the improvement in average
occupancy and rental rates at both of the multi-family properties. Combined
rental revenues improved by $292,000 over fiscal 1995. Interest expense
decreased by $527,000 as a result of the refinancings of the mortgage loans
secured by the Regent's Walk and Mall Corners properties, as discussed further
above. The increase of $203,000 in combined property operating expenses was
largely due to increased repairs and maintenance expenses at the two apartment
properties during fiscal 1996.
A decrease in the Partnership's general and administrative expenses also
contributed to the favorable change in net income for fiscal 1996. General and
administrative expenses decreased by $70,000 mainly due to additional
professional fees incurred in fiscal 1995 related to the valuation of the
Partnership's portfolio of operating investment properties and additional legal
fees associated with the sale of the Partnership's second mortgage interest in
the 150 Broadway Office Building.
1995 Compared to 1994
For the year ended September 30, 1995, the Partnership reported net income
of $262,000 as compared to a net loss of $780,000 in fiscal 1994. This change in
the Partnership's net operating results was mainly the result of certain
transactions involving the Partnership's interest in the 150 Broadway Office
Building. In December 1993, the Partnership funded a $200,000 escrow reserve
account required under the terms of the 150 Broadway bankruptcy settlement
agreement. The Partnership's accounting policy for its investment in 150
Broadway resulted in any advances being recorded as an expense in the period
paid. In addition, during fiscal 1994 the Partnership recognized an $800,000
provision for possible investment loss related to the 150 Broadway investment to
fully reserve the carrying value of the Partnership's remaining investment. In
fiscal 1995, during the quarter ended December 31, 1994, the Partnership
recorded income of $200,000 to reflect the cash proceeds received related to the
sale of the Partnership's interest in 150 Broadway. The favorable changes in the
Partnership's net operating results related to the 150 Broadway investment were
partially offset by a decrease in the Partnership's share of ventures' income of
$200,000 in fiscal 1995. This unfavorable change in the Partnership's share of
ventures' operations was mainly a result of a decrease in rental income of
$330,000 at the Mall Corners Shopping Center, due to the decrease in occupancy
resulting from the vacancy created by the termination of a 20,000 square feet
medical office tenant in fiscal 1995. Revenues also declined slightly at the
Hurstbourne Apartments during fiscal 1995 mainly due to a decrease in corporate
apartment rental activity. An increase in combined depreciation and amortization
expense of $88,000 also contributed to the decline in the Partnership's share of
ventures' income during fiscal 1995. Deprecation charges have increased at the
Mall Corners and Hurstbourne joint ventures as a result of certain capitalized
costs incurred during fiscal 1995 and 1994. A decrease in property operating
expenses at the Regent's Walk Apartments and Hurstbourne Apartments, totalling
$281,000, partially offset the decrease in rental revenues and increase in
depreciation expense during fiscal 1995. The decline in property operating
expenses was primarily attributable to lower repairs and maintenance expenses
for fiscal 1995 at both of the apartment properties. Repairs and maintenance
expenses in fiscal 1994 reflected the costs of an exterior painting project at
Regent's Walk and common area upgrading and landscape repair projects at the
Hurstbourne Apartments.
1994 Compared to 1993
For the year ended September 30, 1994, the Partnership reported a net loss
of $780,000 as compared to net loss of $1,831,000 in fiscal 1993. This decrease
in net loss was the result of the recognition of a provision for possible
investment loss related to the 150 Broadway property of $2,000,000 in fiscal
1993. In fiscal 1994, the Partnership recognized an $800,000 provision for
possible investment loss and an additional $200,000 charge against earnings
related to the 150 Broadway investment. The provision for possible investment
loss in fiscal 1994 was recorded to fully reserve the carrying value of the
Partnership's remaining investment in the 150 Broadway property. The $200,000
charge to earnings in fiscal 1994 represented the funds contributed by the
Partnership in December 1993 to establish the required escrow reserve account
referred to above. In addition, an increase in interest income earned on cash
reserves of $59,000 and a decline in Partnership general and administrative
expenses of $83,000 contributed to the decrease in net loss in fiscal 1994.
<PAGE>
The favorable changes in net loss were partially offset by a decrease in
the Partnership's share of ventures' income of $59,000 in fiscal 1994. The
decrease in the Partnership's share of ventures' income was mainly a result of
an increase in repairs and maintenance expenses at the two apartment complexes.
At the Regent's Walk Apartments, expenses were higher in fiscal 1994 due to an
exterior painting project, and at the Hurstbourne Apartments remodeling of the
common areas of the property and increased landscaping expenses resulting from a
harsh winter contributed to the increased expenses. These unfavorable changes
were partially offset by an increase in rental income of $363,000 from the three
joint ventures, due to a combination of higher occupancy and increased rental
rates at the properties.
Inflation
The Partnership completed its twelfth full year of operations in 1996 and
the effects of inflation and changes in prices on the Partnership's operating
results to date have not been significant.
Inflation in future periods may result in an increase in revenues, as well
as operating expenses, at the Partnership's operating investment properties.
Some of the existing leases with tenants at the Partnership's retail shopping
center contain rental escalation and/or expense reimbursement clauses based on
increases in tenant sales or property operating expenses. Tenants at the
Partnership's apartment properties have short-term leases, generally of
six-to-twelve months in duration. Rental rates at these properties can be
adjusted to keep pace with inflation, as market conditions allow, as the leases
are renewed or turned over. Such increases in rental income would be expected to
at least partially offset the corresponding increases in Partnership and
property operating expenses caused by future inflation.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data are included under Item 14
of this Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Partnership
The Managing General Partner of the Partnership is Sixth Income Properties
Fund, Inc. a Delaware corporation, which is a wholly-owned subsidiary of
PaineWebber. The Associate General Partner of the Partnership is Properties
Associates 1985, L.P., a Virginia limited partnership, certain limited partners
of which are also officers of the Adviser and the Managing General Partner. The
Managing General Partner has overall authority and responsibility for the
Partnership's operation, however, the day-to-day business of the Partnership is
managed by the Adviser pursuant to an advisory contract.
(a) and (b) The names and ages of the directors and principal executive
officers of the Managing General Partner of the Partnership are as follows:
Date
elected
Name Office Age to Office
---- ------ --- ---------
Bruce J. Rubin President and Director 37 8/22/96
Terrence E. Fancher Director 43 10/10/96
Walter V. Arnold Senior Vice President and
Chief Financial Officer 49 10/29/85
James A. Snyder Senior Vice President 51 7/6/92
David F. Brooks First Vice President and
Assistant Treasurer 54 4/25/84 *
Timothy J. Medlock Vice President and Treasurer 35 6/1/88
Thomas W. Boland Vice President 34 12/1/91
* The date of incorporation of the Managing General Partner.
(c) There are no other significant employees in addition to the directors
and executive officers mentioned above.
(d) There is no family relationship among any of the foregoing directors
and executive officers of the Managing General Partner of the Partnership. All
of the foregoing directors and executive officers have been elected to serve
until the annual meeting of the Managing General Partner.
(e) All of the directors and officers of the Managing General Partner hold
similar positions in affiliates of the Managing General Partner, which are the
corporate general partners of other real estate limited partnerships sponsored
by PWI, and for which PaineWebber Properties Incorporated serves as the Adviser.
The business experience of each of the directors and principal executive
officers of the Managing General Partner is as follows:
Bruce J. Rubin is President and Director of the Managing General
Partner. Mr. Rubin was named President and Chief Executive Officer of PWPI
in August 1996. Mr. Rubin joined PaineWebber Real Estate Investment Banking
in November 1995 as a Senior Vice President. Prior to joining PaineWebber,
Mr. Rubin was employed by Kidder, Peabody and served as President for KP
Realty Advisers, Inc. Prior to his association with Kidder, Mr. Rubin was a
Senior Vice President and Director of Direct Investments at Smith Barney
Shearson. Prior thereto, Mr. Rubin was a First Vice President and a real
estate workout specialist at Shearson Lehman Brothers. Prior to joining
Shearson Lehman Brothers in 1989, Mr. Rubin practiced law in the Real Estate
Group at Willkie Farr & Gallagher. Mr. Rubin is a graduate of Stanford
University and Stanford Law School.
<PAGE>
Terrence E. Fancher was appointed a Director of the Managing General
Partner in October 1996. Mr. Fancher is the Managing Director in charge of
PaineWebber's Real Estate Investment Banking Group. He joined PaineWebber as
a result of the firm's acquisition of Kidder, Peabody. Mr. Fancher is
responsible for the origination and execution of all of PaineWebber's REIT
transactions, advisory assignments for real estate clients and certain of the
firm's real estate debt and principal activities. He joined Kidder, Peabody
in 1985 and, beginning in 1989, was one of the senior executives responsible
for building Kidder, Peabody's real estate department. Mr. Fancher
previously worked for a major law firm in New York City. He has a J.D. from
Harvard Law School, an M.B.A. from Harvard Graduate School of Business
Administration and an A.B. from Harvard College.
Walter V. Arnold is a Senior Vice President and Chief Financial Officer
of the Managing General Partner and a Senior Vice President and Chief
Financial Officer of the Adviser which he joined in October 1985. Mr. Arnold
joined PWI in 1983 with the acquisition of Rotan Mosle, Inc. where he had
been First Vice President and Controller since 1978, and where he continued
until joining the Adviser. Mr. Arnold is a Certified Public Accountant
licensed in the state of Texas.
James A. Snyder is a Senior Vice President of the Managing General Partner
and a Senior Vice President of the Adviser. Mr. Snyder re-joined the Adviser in
July 1992 having served previously as an officer of PWPI from July 1980 to
August 1987. From January 1991 to July 1992, Mr. Snyder was with the Resolution
Trust Corporation, where he served as the Vice President of Asset Sales prior to
re-joining PWPI. From February 1989 to October 1990, he was President of Kan Am
Investors, Inc., a real estate investment company. During the period August 1987
to February 1989, Mr. Snyder was Executive Vice President and Chief Financial
Officer of Southeast Regional Management Inc., a real estate development
company.
David F. Brooks is a First Vice President and Assistant Treasurer of the
Managing General Partner and a First Vice President and an Assistant Treasurer
of the Adviser. Mr. Brooks joined the Adviser in March 1980. From 1972 to 1980,
Mr. Brooks was an Assistant Treasurer of Property Capital Advisors, Inc. and
also, from March 1974 to February 1980, the Assistant Treasurer of Capital for
Real Estate, which provided real estate investment, asset management and
consulting services.
Timothy J. Medlock is a Vice President and Treasurer of the Managing
General Partner and Vice President and Treasurer of the Adviser which he joined
in 1986. From June 1988 to August 1989, Mr. Medlock served as the Controller of
the Managing General Partner and the Adviser. From 1983 to 1986, Mr. Medlock was
associated with Deloitte Haskins & Sells. Mr. Medlock graduated from Colgate
University in 1983 and received his Masters in Accounting from New York
University in 1985.
Thomas W. Boland is a Vice President of the Managing General Partner
and a Vice President and Manager of Financial Reporting of the Adviser which
he joined in 1988. From 1984 to 1987, Mr. Boland was associated with Arthur
Young & Company. Mr. Boland is a Certified Public Accountant licensed in the
state of Massachusetts. He holds a B.S. in Accounting from Merrimack College
and an M.B.A. from Boston University.
(f) None of the directors and officers were involved in legal proceedings
which are material to an evaluation of his or her ability or integrity as a
director or officer.
(g) Compliance With Exchange Act Filing Requirements: The Securities
Exchange Act of 1934 requires the officers and directors of the Managing General
Partner, and persons who own more than ten percent of the Partnership's limited
partnership units, to file certain reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and ten-percent
beneficial holders are required by SEC regulations to furnish the Partnership
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, the
Partnership believes that, during the year ended September 30, 1996, all filing
requirements applicable to the officers and directors of the Managing General
Partner and ten-percent beneficial holders were complied with.
<PAGE>
Item 11. Executive Compensation
The directors and officers of the Partnership's Managing General Partner
receive no direct remuneration from the Partnership. The Partnership is required
to pay certain fees to the Adviser, and the General Partners are entitled to
receive a share of Partnership cash distributions and a share of profits and
losses. These items are described under Item 13.
Regular quarterly distributions to the Partnership's Unitholders were
suspended from fiscal 1991 through the first half of fiscal 1994. Distributions
were reinstated at an annual rate of 2% on original invested capital effective
for the third quarter of fiscal 1994. However, the Partnership's Units of
Limited Partnership Interest are not actively traded on any organized exchange,
and no efficient secondary market exists. Accordingly, no accurate price
information is available for these Units. Therefore, a presentation of
historical Unitholder total returns would not be meaningful.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) The Partnership is a limited partnership issuing Units of limited
partnership interest, not voting securities. All the outstanding stock of the
Managing General Partner, Sixth Income Properties Fund, Inc., is owned by
PaineWebber. Properties Associates 1985, L.P., the Associate General Partner, is
a Virginia limited partnership, certain limited partners of which are also
officers of the Adviser and the Managing General Partner. No limited partner is
known by the Partnership to own beneficially more than 5% of the outstanding
interests of the Partnership.
(b) The directors and officers of the Managing General Partner do not
directly own any Units of limited partnership interest of the Partnership. No
director or officer of the Managing General Partner, nor any limited partner of
the Associate General Partner, possesses a right to acquire beneficial ownership
of Units of limited partnership interest of the Partnership. As of September 30,
1996, PaineWebber and its affiliates owned 255 Units of limited partnership
interests of the Partnership.
(c) There exists no arrangement, known to the Partnership, the operation
of which may, at a subsequent date, result in a change in control of the
Partnership.
Item 13. Certain Relationships and Related Transactions
The General Partners of the Partnership are Sixth Income Properties Fund,
Inc. (the "Managing General Partner"), a wholly-owned subsidiary of PaineWebber
Group, Inc. ("PaineWebber") and Properties Associates 1985, L.P. (the "Associate
General Partner"), a Virginia limited partnership, certain limited partners of
which are also officers of the Managing General Partner and PaineWebber
Properties Incorporated (the "Adviser"). Subject to the Managing General
Partner's overall authority, the business of the Partnership is managed by the
Adviser pursuant to an advisory contract. The Adviser is a wholly-owned
subsidiary of PaineWebber Incorporated ("PWI"). The General Partners, the
Adviser and PWI receive fees and compensation, determined on an agreed-upon
basis, in consideration of various services performed in connection with the
sale of the Units, the management of the Partnership and the acquisition,
management, financing and disposition of Partnership investments.
In connection with the acquisition of properties, the Adviser received
acquisition fees in an amount equal to 5% of the gross proceeds from the sale of
the Partnership Units. In connection with the sale of each property, the Adviser
may receive a disposition fee, payable upon liquidation of the Partnership, in
an amount equal to the lesser of 1% of the aggregate sales price of the property
or 50% of the standard brokerage commissions, subordinated to the payment of
certain amounts to the Limited Partners.
All taxable income or tax loss (other than from a Capital Transaction) of
the Partnership will be allocated 98.94802625% to the Limited Partners and
1.05197375% to the General Partners. Taxable income or loss arising from a sale
or refinancing of investment properties will be allocated to the Limited
Partners and the General Partners in proportion to the amounts of sale or
refinancing proceeds to which they are entitled; provided, that the General
Partners shall be allocated at least 1% of taxable income arising from a sale or
refinancing. If there are no sale or refinancing proceeds, taxable income or tax
loss from a sale or refinancing will be allocated 98.94802625% to the Limited
Partners and 1.05197375% to the General Partners. Notwithstanding this, the
Partnership Agreement provides that the allocation of taxable income and tax
losses arising from the sale of a property which leads to the dissolution of the
Partnership shall be adjusted to the extent feasible so that neither the General
or Limited Partners recognize any gain or loss as a result of having either a
positive or negative balance remaining in their capital accounts upon the
dissolution of the Partnership. If the General Partner has a negative capital
account balance subsequent to the sale of a property which leads to the
dissolution of the Partnership, the General Partner may be obligated to restore
a portion of such negative capital account balance as determined in accordance
with the provisions of the Partnership Agreement. Allocations of the
Partnership's operations between the General Partners and the Limited Partners
for financial accounting purposes have been made in conformity with the
allocations of taxable income or tax loss.
All distributable cash, as defined, for each fiscal year shall be
distributed quarterly in the ratio of 95% to the Limited Partners, 1.01% to the
General Partners and 3.99% to the Adviser, as an asset management fee. All sale
or refinancing proceeds shall be distributed in varying proportions to the
Limited and General Partners, as specified in the Partnership Agreement.
Under the advisory contract, the Adviser has specific management
responsibilities: to administer day-to-day operations of the Partnership, and to
report periodically the performance of the Partnership to the Managing General
Partner. The Adviser will be paid a basic management fee (3% of adjusted cash
flow, as defined in the Partnership Agreement) and an incentive management fee
(2% of adjusted cash flow subordinated to a noncumulative annual return to the
Limited Partners equal to 6% based upon their adjusted capital contributions),
in addition to the asset management fee described above, for services rendered.
The Adviser earned total basic and asset management fees of $88,000 for the year
ended September 30, 1996. No incentive management fees were earned during fiscal
1996.
An affiliate of the Managing General Partner performs certain accounting,
tax preparation, securities law compliance and investor communications and
relations services for the Partnership. The total costs incurred by this
affiliate in providing such services are allocated among several entities,
including the Partnership. Included in general and administrative expenses for
the year ended September 30, 1996 is $107,000, representing reimbursements to
this affiliate for providing such services to the Partnership.
The Partnership uses the services of Mitchell Hutchins Institutional
Investors, Inc. ("Mitchell Hutchins") for the managing of cash assets. Mitchell
Hutchins is a subsidiary of Mitchell Hutchins Asset Management, Inc., an
independently operated subsidiary of PaineWebber. Mitchell Hutchins earned fees
of $5,000 (included in general and administrative expenses) for managing the
Partnership's cash assets during the year ended September 30, 1996. Fees charged
by Mitchell Hutchins are based on a percentage of invested cash reserves which
varies based on the total amount of invested cash which Mitchell Hutchins
manages on behalf of PWPI.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) and (2) Financial Statements and Schedules:
The response to this portion of Item 14 is submitted as a
separate section of this report. See Index to Financial
Statements and Financial Statement Schedules at page F-1.
(3) Exhibits:
The exhibits listed on the accompanying Index to Exhibits at
page IV-3 are filed as part of this Report.
(b) No Current Reports on Form 8-K were filed during the
last quarter of fiscal 1996.
(c) Exhibits
See (a)(3) above.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a
separate section of this report. See Index to Financial
Statements and Financial Statement Schedules at page F-1.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PAINE WEBBER INCOME PROPERTIES SIX
LIMITED PARTNERSHIP
By: Sixth Income Properties Fund, Inc.
Managing General Partner
By: /s/ Bruce J. Rubin
----------------------
Bruce J. Rubin
President and Chief Executive Officer
By: /s/ Walter V. Arnold
------------------------
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
By: /s/ Thomas W. Boland
------------------------
Thomas W. Boland
Vice President
Dated: December 30, 1996
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 Partnership in
the capacity and on the dates indicated.
By:/s/ Bruce J. Rubin Date: December 30, 1996
----------------------- -----------------
Bruce J. Rubin
Director
By:/s/ Terrence E. Fancher Date: December 30, 1996
----------------------- -----------------
Terrence E. Fancher
Director
<PAGE>
ANNUAL REPORT ON FORM 10-K
Item 14(a)(3)
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
INDEX TO EXHIBITS
Page Number in the Report
Exhibit No. Description of Document or Other Reference
- ----------------------------------- ------------------
(3) and (4) Prospectus of the Registrant Filed with the Commission
dated September 17, 1984, supplemented, pursuant to Rule 424(c)
with particular reference to the and incorporated herein
Restated Certificate and Agreement by reference.
Limited Partnership.
(10) Material contracts previously filed as Filed with the Commission
exhibits to registration statements and pursuant to Section 13
amendments thereto of the registrant or 15(d)of the Securities
together with all such contracts filed Exchange Act of 1934 and
as exhibits of previously filed Forms incorporated herein by
8-K and Forms 10-K are hereby reference.
incorporated herein by reference.
(13) Annual Reports to Limited Partners No Annual Report for the
year ended September 30,
1996 has been sent to the
Limited Partners. An
Annual Report will be
sent to the Limited
Partners subsequent to
this filing.
(27) Financial Data Schedule Filed as last page of
EDGAR submission following
the Financial Statements
and Financial Statement
Schedule required by
Item 14.
<PAGE>
ANNUAL REPORT ON FORM 10-K
Item 14(a) (1) and (2) and 14(d)
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Reference
---------
Paine Webber Income Properties Six Limited Partnership:
Report of independent auditors F-2
Balance sheets as of September 30, 1996 and 1995 F-3
Statements of operations for the years ended September 30,
1996, 1995 and 1994 F-4
Statements of changes in partners' capital (deficit)
for the years ended September 30, 1996, 1995 and 1994 F-5
Statements of cash flows for the years ended September 30,
1996, 1995 and 1994 F-6
Notes to financial statements F-7
Combined Joint Ventures of Paine Webber Income Properties Six Limited
Partnership:
Report of independent auditors F-18
Combined balance sheets as of September 30, 1996 and 1995 F-19
Combined statements of income and changes in ventures' capital
for the years ended September 30, 1996, 1995 and 1994 F-20
Combined statements of cash flows for the years ended
September 30, 1996, 1995 and 1994 F-21
Notes to combined financial statements F-22
Schedule III - Real Estate and Accumulated Depreciation F-31
Other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements, including the notes thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
Paine Webber Income Properties Six Limited Partnership:
We have audited the accompanying balance sheets of Paine Webber Income
Properties Six Limited Partnership as of September 30, 1996 and 1995, and the
related statements of operations, changes in partners' capital (deficit), and
cash flows for each of the three years in the period ended September 30, 1996.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Paine Webber Income
Properties Six Limited Partnership at September 30, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended September 30, 1996 in conformity with generally accepted
accounting principles.
/S/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
Boston, Massachusetts
December 24, 1996
<PAGE>
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
BALANCE SHEETS
September 30, 1996 and 1995
(In thousands, except per Unit amounts)
ASSETS
1996 1995
---- ----
Investments in joint ventures, at equity $ 5,440 $ 6,585
Cash and cash equivalents 3,218 2,515
--------- ---------
$ 8,658 $ 9,100
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable - affiliates $ 10 $ 15
Accrued expenses and other liabilities 24 30
--------- ---------
Total liabilities 34 45
Partners' capital:
General Partners:
Capital contributions 1 1
Cumulative net loss (835) (843)
Cumulative cash distributions (513) (500)
Limited Partners ($1,000 per unit;
60,000 Units issued):
Capital contributions, net of offering costs 53,959 53,959
Cumulative net loss (29,486) (30,260)
Cumulative cash distributions (14,502) (13,302)
--------- ---------
Total partners' capital 8,624 9,055
--------- ---------
$ 8,658 $ 9,100
========= =========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the years ended September 30, 1996, 1995 and 1994
(In thousands, except per Unit amounts)
1996 1995 1994
---- ---- ----
Revenues:
Interest income $ 159 $ 161 $ 106
Income from sale of second
mortgage interest 100 200 -
--------- -------- --------
259 361 106
Expenses:
Provision for possible
investment loss - - 800
Cost of holding investment in
150 Broadway Office Building - - 200
Management fees 88 88 32
General and administrative 263 333 376
--------- -------- --------
351 421 1,408
--------- -------- --------
Operating loss (92) (60) (1,302)
Partnership's share of
ventures' income 874 322 522
--------- -------- --------
Net income (loss) $ 782 $ 262 $ (780)
========= ======== ========
Per Limited Partnership Unit:
Net income (loss) $ 12.89 $ 4.33 $ (12.86)
======== ======== ========
Cash distributions $ 20.00 $ 20.00 $ 5.00
======= ======== ========
The above per Limited Partnership Unit information is based upon the 60,000
Limited Partnership Units outstanding during each year.
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the years ended September 30, 1996, 1995 and 1994
(In thousands)
General Limited
Partners Partners Total
-------- -------- -----
Balance at September 30, 1993 $(1,321) $12,410 $11,089
Cash distributions (3) (300) (303)
Net loss (8) (772) (780)
-------- ------- -------
Balance at September 30, 1994 (1,332) 11,338 10,006
Cash distributions (13) (1,200) (1,213)
Net income 3 259 262
-------- -------- ---------
Balance at September 30, 1995 (1,342) 10,397 9,055
Cash distributions (13) (1,200) (1,213)
Net income 8 774 782
-------- -------- --------
Balance at September 30, 1996 $(1,347) $ 9,971 $ 8,624
======= ======= =======
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the years ended September 30, 1996, 1995 and 1994
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 782 $ 262 $ (780)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Partnership's share of ventures' income (874) (322) (522)
Income from sale of second mortgage
interest (100) (200) -
Provision for possible investment loss - - 800
Changes in assets and liabilities:
Other assets - - 2
Accounts payable - affiliates (5) 6 (30)
Accrued expenses and other liabilities (6) 9 (11)
-------- -------- -------
Total adjustments (985) (507) 239
-------- -------- -------
Net cash used in operating activities (203) (245) (541)
Cash flows from investing activities:
Distributions from joint ventures 2,019 1,406 1,948
Cash contributions to joint ventures - (200) (28)
Proceeds from sale of investment in
150 Broadway Office Building 100 200 -
-------- -------- -------
Net cash provided by investing
activities 2,119 1,406 1,920
Cash flows from financing activities:
Distributions to partners (1,213) (1,213) (303)
-------- -------- --------
Net cash used in financing activities (1,213) (1,213) (303)
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents 703 (52) 1,076
Cash and cash equivalents, beginning of year 2,515 2,567 1,491
-------- -------- --------
Cash and cash equivalents, end of year $ 3,218 $ 2,515 $ 2,567
======== ======== ========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SIX
LIMITED PARTNERSHIP
Notes to Financial Statements
1. Organization and Nature of Operations
Paine Webber Income Properties Six Limited Partnership (the "Partnership")
is a limited partnership organized pursuant to the laws of the State of
Delaware in April 1984 for the purpose of investing in a diversified
portfolio of income-producing properties. The Partnership authorized the
issuance of units (the "Units") of partnership interests (at $1,000 per
Unit) of which 60,000 were subscribed and issued between September 17, 1984
and September 16, 1985.
The Partnership originally invested the net proceeds of the public
offering, through joint venture partnerships, in five operating properties,
comprised of two multi-family apartment complexes, two commercial office
buildings and one retail shopping center. As discussed further in Note 5,
the sale of the Partnership's remaining interest in the 150 Broadway Office
Building was finalized during fiscal 1996. In addition, during fiscal 1992
the Partnership forfeited its interest in the other office building,
Northbridge Office Centre, as a result of certain defaults under the terms
of the property's mortgage indebtedness. The mortgage lender took title to
the Northbridge property through foreclosure proceedings on April 20, 1992,
after a protracted period of negotiations failed to produce a mutually
acceptable restructuring agreement. Furthermore, the Partnership's efforts
to recapitalize, sell or refinance the property were unsuccessful. The
inability of the Northbridge joint venture to generate sufficient funds to
meet its debt service obligations resulted mainly from a significant
oversupply of competing office space in the West Palm Beach, Florida market.
Management did not foresee any near term improvement in such conditions and
ultimately determined that it was in the Partnership's best interests not to
contest the lender's foreclosure action.
2. Use of Estimates and Summary of Significant Accounting Policies
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles which require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of September 30, 1996 and 1995 and
revenues and expenses for each of the three years in the period ended
September 30, 1996. Actual results could differ from the estimates and
assumptions used.
The accompanying financial statements include the Partnership's
investments in certain joint venture partnerships which own operating
properties. The Partnership accounts for its investments in joint venture
partnerships using the equity method because the Partnership does not have a
voting control interest in the ventures. Under the equity method the venture
is carried at cost adjusted for the Partnership's share of the venture's
earnings or losses and distributions. See Note 4 for a description of these
joint venture partnerships.
The Partnership has reviewed FAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of," which is
effective for financial statements for years beginning after December 15,
1995, and believes this new pronouncement will not have a material effect on
the Partnership's financial statements.
For purposes of reporting cash flows, cash and cash equivalents include
all highly liquid investments with original maturities of 90 days or less.
The cash and cash equivalents, accounts payable - affiliates, accrued
expenses and other liabilities appearing on the accompanying balance sheets
represent financial instruments for purposes of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments." The carrying amount of these assets and liabilities
approximates their fair value as of September 30, 1996 due to the short-term
maturities of these instruments.
No provision for income taxes has been made in the accompanying financial
statements as the liability for such taxes is that of the partners rather
than the Partnership. Upon sale or disposition of the Partnership's
investments, the taxable gain or the taxable loss incurred will be allocated
among the partners. In cases where the disposition of the investment
involves the lender foreclosing on the investment, taxable income could
occur without distribution of cash. This income would represent passive
income to the partners which could be offset by each partners' existing
passive losses, including any passive loss carryovers from prior years.
<PAGE>
3. The Partnership Agreement and Related Party Transactions
The General Partners of the Partnership are Sixth Income Properties Fund,
Inc. (the "Managing General Partner"), a wholly-owned subsidiary of
PaineWebber Group, Inc. ("PaineWebber") and Properties Associates 1985, L.P.
(the "Associate General Partner"), a Virginia limited partnership, certain
limited partners of which are also officers of the Managing General Partner
and PaineWebber Properties Incorporated (the "Adviser"). Subject to the
Managing General Partner's overall authority, the business of the
Partnership is managed by the Adviser pursuant to an advisory contract. The
Adviser is a wholly-owned subsidiary of PaineWebber Incorporated ("PWI").
The General Partners, the Adviser and PWI receive fees and compensation,
determined on an agreed-upon basis, in consideration of various services
performed in connection with the sale of the Units, the management of the
Partnership and the acquisition, management, financing and disposition of
Partnership investments.
In connection with the acquisition of properties, the Adviser received
acquisition fees in an amount equal to 5% of the gross proceeds from the
sale of the Partnership Units. In connection with the sale of each property,
the Adviser may receive a disposition fee, payable upon liquidation of the
Partnership, in an amount equal to the lesser of 1% of the aggregate sales
price of the property or 50% of the standard brokerage commissions,
subordinated to the payment of certain amounts to the Limited Partners.
All taxable income or tax loss (other than from a Capital Transaction) of
the Partnership will be allocated 98.94802625% to the Limited Partners and
1.05197375% to the General Partners. Taxable income or loss arising from a
sale or refinancing of investment properties will be allocated to the
Limited Partners and the General Partners in proportion to the amounts of
sale or refinancing proceeds to which they are entitled; provided, that the
General Partners shall be allocated at least 1% of taxable income arising
from a sale or refinancing. If there are no sale or refinancing proceeds,
taxable income or tax loss from a sale or refinancing will be allocated
98.94802625% to the Limited Partners and 1.05197375% to the General
Partners. Notwithstanding this, the Partnership Agreement provides that the
allocation of taxable income and tax losses arising from the sale of a
property which leads to the dissolution of the Partnership shall be adjusted
to the extent feasible so that neither the General or Limited Partners
recognize any gain or loss as a result of having either a positive or
negative balance remaining in their capital accounts upon the dissolution of
the Partnership. If the General Partner has a negative capital account
balance subsequent to the sale of a property which leads to the dissolution
of the Partnership, the General Partner may be obligated to restore a
portion of such negative capital account balance as determined in accordance
with the provisions of the Partnership Agreement. Allocations of the
Partnership's operations between the General Partners and the Limited
Partners for financial accounting purposes have been made in conformity with
the allocations of taxable income or tax loss.
All distributable cash, as defined, for each fiscal year shall be
distributed quarterly in the ratio of 95% to the Limited Partners, 1.01% to
the General Partners and 3.99% to the Adviser, as an asset management fee.
All sale or refinancing proceeds shall be distributed in varying proportions
to the Limited and General Partners, as specified in the Partnership
Agreement.
Under the advisory contract, the Adviser has specific management
responsibilities: to administer day-to-day operations of the Partnership,
and to report periodically the performance of the Partnership to the
Managing General Partner. The Adviser will be paid a basic management fee
(3% of adjusted cash flow, as defined in the Partnership Agreement) and an
incentive management fee (2% of adjusted cash flow subordinated to a
noncumulative annual return to the Limited Partners equal to 6% based upon
their adjusted capital contributions), in addition to the asset management
fee described above, for services rendered. The Adviser earned total basic
and asset management fees of $88,000, $88,000 and $32,000 for the years
ended September 30, 1996, 1995 and 1994, respectively. No incentive
management fees have been earned to date. Accounts payable - affiliates at
both September 30, 1996 and 1995 includes $9,000 of management fees payable
to the Adviser.
Included in general and administrative expenses for the years ended
September 30, 1996, 1995 and 1994 is $107,000, $120,000 and $121,000,
respectively, representing reimbursements to an affiliate of the Managing
General Partner for providing certain financial, accounting and investor
communication services to the Partnership.
The Partnership uses the services of Mitchell Hutchins Institutional
Investors, Inc. ("Mitchell Hutchins") for the managing of cash assets.
Mitchell Hutchins is a subsidiary of Mitchell Hutchins Asset Management,
Inc., an independently operated subsidiary of PaineWebber. Mitchell Hutchins
earned fees of $5,000, $9,000 and $5,000 (included in general and
administrative expenses) for managing the Partnership's cash assets during
fiscal 1996, 1995 and 1994, respectively.
<PAGE>
4. Investments in Joint Ventures
The Partnership has investments in three joint ventures at September 30,
1996 and 1995. The joint ventures are accounted for on the equity method in
the Partnership's financial statements.
Condensed combined financial statements of these joint ventures follow:
Condensed Combined Balance Sheets
September 30, 1996 and 1995
(In thousands)
Assets
1996 1995
---- ----
Current assets $ 2,097 $ 1,423
Operating investment properties, net 44,021 43,852
Other assets 1,354 1,145
--------- ---------
$ 47,472 $ 46,420
========= =========
Liabilities and Venturers' Capital
Current liabilities $ 3,010 $ 2,830
Other liabilities 269 269
Long-term debt 36,307 34,228
Partnership's share of combined capital 4,414 5,621
Co-venturers' share of combined capital 3,472 3,472
--------- ---------
$ 47,472 $ 46,420
========= =========
Reconciliation of Partnership's Investment
(in thousands)
1996 1995
---- ----
Partnership's share of capital, as shown above $ 4,414 $ 5,621
Partnership's share of current
liabilities and long-term debt 983 921
Excess basis due to investment
in ventures (1) 43 43
-------- --------
Investments in unconsolidated joint ventures,
at equity $ 5,440 $ 6,585
======== ========
(1) At September 30, 1996 and 1995, the Partnership's investment exceeds its
share of the joint venture capital accounts and liabilities by $43,000. This
amount relates to certain expenses associated with acquiring the
investments.
Condensed Combined Summary of Operations
For the years ended September 30, 1996, 1995 and 1994
(In thousands)
1996 1995 1994
---- ---- ----
Rental revenues and
expense recoveries $ 9,414 $ 9,122 $ 9,482
Interest income 41 26 26
------- ------- --------
9,455 9,148 9,508
Property operating expenses 3,358 3,156 3,404
Depreciation and amortization 2,288 2,208 2,120
Interest expense 2,935 3,462 3,462
------- ------- --------
8,581 8,826 8,986
------- ------- --------
Net income $ 874 $ 322 $ 522
======= ======= ========
Partnership's share of
combined income $ 874 $ 322 $ 522
Co-venturers' share of
combined income - - -
------- ------- --------
$ 874 $ 322 $ 522
======= ======= ========
<PAGE>
Investments in joint ventures, at equity, represents the Partnership's net
investment in the joint venture partnerships. These joint ventures are
subject to partnership agreements which determine the distribution of
available funds, the disposition of the venture's assets and the rights of
the partners, regardless of the Partnership's percentage ownership interest
in the venture. Substantially all of the Partnership's investments in these
joint ventures are restricted as to distributions.
Investments in joint ventures, at equity,on the balance sheet is comprised
of the following joint venture investments (in thousands):
1996 1995
---- ----
Regent's Walk Associates $ 1,289 $ 1,583
Kentucky-Hurstbourne Associates 3,718 3,745
Gwinnett Mall Corners Associates 433 1,257
-------- -------
$ 5,440 $ 6,585
======== =======
The Partnership received cash distributions from the joint ventures as set
forth below (in thousands):
1996 1995 1994
---- ---- ----
Regent's Walk Associates $ 500 $ 276 $ 496
Kentucky-Hurstbourne Associates 503 660 507
Gwinnett Mall Corners Associates 1,016 470 945
-------- -------- -------
$ 2,019 $ 1,406 $ 1,948
======== ======== =======
Descriptions of the properties owned by the joint ventures and the terms
of the joint venture agreements are summarized as follows:
a. Regent's Walk Associates
On May 15, 1985, the Partnership acquired an interest in Regent's Walk
Associates, a Kansas general partnership that owns and operates Regent's
Walk Apartments, a 255-unit apartment complex in Overland Park, Johnson
County, Kansas. The Partnership is a general partner in the joint venture.
The Partnership's co-venture partner is an affiliate of J. A. Peterson
Enterprises, Inc. The initial aggregate cash investment by the Partnership
for its interest was approximately $6,768,000 (including an acquisition fee
of $390,000 paid to the Adviser). The apartments are encumbered by a
nonrecourse first mortgage loan with an initial principal balance of
$9,000,000 secured by the operating investment property. The note requires
monthly payments, including interest at 7.32%, with the unpaid principal
balance of $8,500,163 due October 1, 2000.
The joint venture agreement provides that the Partnership will receive
from cash flow a cumulative preferred return, payable quarterly, of
$164,000. Commencing June 1, 1988, after the Partnership has received its
cumulative preferred return, the co-venturer is entitled to a preference
return of $7,000 for each fiscal quarter which is cumulative only for
amounts due in any one fiscal year. Any remaining cash flow is to be used to
pay interest on any notes from the joint venture to the partners and then is
to be distributed to the partners, with the Partnership receiving 90% of the
first $200,000, 80% of the next $200,000 and 70% of any remainder. During
the year ended September 30, 1996, the Partnership's preferred return
aggregated $656,000, while net cash available for distribution amounted to
$551,000. The total unpaid cumulative preferred return payable to the
Partnership amounted to $2,825,000 as of September 30, 1996. The cumulative
unpaid preference return is payable only in the event that sufficient future
cash flow or sale or refinancing proceeds are available. Accordingly, the
unpaid preferred return has not been accrued in the venture's financial
statements.
Taxable income or tax loss is to be allocated to the partners based on
their proportionate share of cash distributions. Allocations of the
venture's operations between the Partnership and the co-venturer for
financial accounting purposes have been made in conformity with the
allocations of taxable income or tax loss.
If additional cash is needed by the joint venture for any reason including
payment of the Partnership's preference return, prior to June 1, 1992, the
co-venturer was required to make loans to the joint venture up to a total of
$250,000. After the joint venture has borrowed $250,000 from the
co-venturer, if the joint venture requires additional funds for purposes
other than distributions, then it will be provided 90% by the Partnership
and 10% by the co-venturer. As of September 30, 1996, the joint venture had
loans payable to the co-venturer and the Partnership aggregating $264,882
and $133,943, respectively.
<PAGE>
Sale and/or refinancing proceeds will be distributed as follows, after
making a provision for liabilities and obligations: (1) repayment to the
co-venturer of up to $250,000 of operating loans plus accrued interest
thereon, (2) payment of accrued interest and repayment of principal of
operating notes (pro-rata), (3) to the Partnership, payment of any preferred
return arrearage, (4) to the Partnership, an amount equal to the
Partnership's gross investment plus $560,000, (5) to the co-venturer, the
amount of $500,000, (6) to payment of a brokers fee to the partners if a
sale is made to a third party, (7) to the payment of up to $100,000 of
subordinated management fees, (8) the next $8,000,000 to the Partnership and
the co-venturer in the proportions of 90% and 10%, respectively, (9) the
next $4,000,000 to the Partnership and the co-venturer in the proportions of
80% and 20%, respectively, and (10) any remaining balance 70% to the
Partnership and 30% to the co-venturer.
The joint venture has entered into a property management contract with an
affiliate of the co-venturer, cancellable at the option of the Partnership
upon the occurrence of certain events. The management fee was 4% of the
gross rents collected from the property until June 1, 1990 when the fee
increased to 5% of the gross rents. Subsequent to June 1, 1988, that portion
of the fees representing 1% of gross rents shall be payable only to the
extent of cash flow remaining after the Partnership has received its
preferred return. Any payments not made pursuant to the above are payable
only out of sale or refinancing proceeds the amount of which will not exceed
$100,000 as specified in the agreement. Total subordinated management fees
as of September 30, 1996 exceed this $100,000 limitation.
b. Kentucky-Hurstbourne Associates
On July 25, 1985, the Partnership acquired an interest in
Kentucky-Hurstbourne Associates, a Delaware general partnership that owns
and operates Hurstbourne Apartments, a 409-unit apartment complex located in
Louisville, Kentucky. The Partnership is a general partner in the joint
venture. The Partnership's co-venture partner is an affiliate of the Paragon
Group. The initial aggregate cash investment by the Partnership for its
interest was approximately $8,716,000 (including an acquisition fee of
$500,000 paid to the Adviser). The apartments are encumbered by a
nonrecourse first mortgage loan with a balance of $8,361,000 as of September
30, 1996. This mortgage loan is scheduled to mature in September 1999.
The joint venture agreement, as amended on May 21, 1986, provides that
cash flow shall first be distributed to the Partnership in the amount of
$67,000 per month (the Partnership's preference return). The preference
return was cumulative on a year to year basis through July 31, 1989, and is
noncumulative thereafter. The next $40,000 will be distributed to the
co-venturer on a noncumulative annual basis, payable quarterly. Any cash
flow not previously distributed at the end of each fiscal year will be
applied in the following order: first, to the payment of all unpaid accrued
interest on all outstanding operating notes; the next $225,000 of annual
cash flow will be distributed 90% to the Partnership and 10% to the
co-venturer; the next $260,000 of annual cash flow will be distributed 80%
to the Partnership and 20% to the co-venturer, and any remaining balance
will be distributed 70% to the Partnership and 30% to the co-venturer. At
September 30, 1996, the cumulative preference return payable to the
Partnership for years prior to July 31, 1989 was approximately $1,354,000.
Under the terms of the joint venture agreement, unpaid preference returns
will only be paid upon refinancing, sale, exchange or other disposition of
the property. Accordingly, the unpaid preferred return has not been accrued
in the venture's financial statements.
Taxable income or tax loss of the joint venture will be allocated to the
Partnership and co-venturer in proportion to the distribution of net cash
flow subject to the following: first, the co-venturer shall not be allocated
less than 10% of the net income or net loss; second, the co-venturer shall
not be allocated net profits in excess of net cash flow distributed to it
during the fiscal year. Internal Revenue Service regulations require
partnership allocations of income and loss to the respective partners to
have "substantial economic effect". This requirement resulted in the
venture's income and losses for the years ended September 30, 1996, 1995 and
1994 being allocated in a manner different from that provided in the venture
agreement such that none of the losses were allocated to the co-venturer.
Allocations of the venture's operations between the Partnership and the
co-venturer for financial accounting purposes have been made in conformity
with the actual allocation of taxable income or tax loss.
Any proceeds arising from a refinancing, sale, exchange or other
disposition of property will be distributed first to the payment of unpaid
principal and accrued interest on the outstanding first mortgage loan. Any
remaining proceeds will be distributed in the following order: repayment of
unpaid operating loans and accrued interest thereon to the Partnership and
the co-venturer; the amount of any undistributed preference payments to the
Partnership (for the period through July 31, 1989); $10,056,000 to the
Partnership; $684,000 to the co-venturer; the amount of any unpaid
subordinated management fees to the property manager; $9,000,000 distributed
90% to the Partnership and 10% to the co-venturer; $4,500,000 distributed
80% to the Partnership and 20% to the co-venturer with any remaining balance
distributed 70% to the Partnership and 30% to the co-venturer.
<PAGE>
If additional cash is required by the joint venture, it may be provided by
the Partnership and the co-venturer as loans to the joint venture. Such
loans would be provided 90% by the Partnership and 10% by the co-venturer.
Through September 30, 1996, no such loans were outstanding.
The joint venture has entered into a property management contract with an
affiliate of the co-venturer, cancellable at the option of the Partnership
upon the occurrence of certain events. The management fee is 5% of gross
receipts collected from the property. Two percent of such fees were
subordinated to the Partnership's and co-venturer's returns during the first
three years of the joint venture's operations. Under the terms of the joint
venture agreement, unpaid subordinated management fees total $118,000 and
will only be paid upon refinancing, sale, exchange or other disposition of
the property.
c. Gwinnett Mall Corners Associates
On August 28, 1985, the Partnership acquired an interest in Gwinnett Mall
Corners Associates, a Georgia general partnership that owns and operates
Mall Corners Shopping Center, a 304,000 gross leasable square foot shopping
center, located in Gwinnett County, Georgia. The Partnership is a general
partner in the joint venture. The Partnership's co-venture partner is a
partnership comprised of several individual investors.
The initial aggregate cash investment by the Partnership for its interest
was approximately $10,707,000 (including an acquisition fee of $579,000 paid
to the Adviser). The shopping center was encumbered by a construction
mortgage loan with a balance of $22,669,000 at the time of closing. The
construction mortgage loan was refinanced on November 4, 1985 with permanent
financing of $17,700,000, with the remainder paid out of escrows established
at the time of closing. The balance of the 11.5% nonrecourse permanent
mortgage loan, which was scheduled to mature in December 1995, was
$17,266,000 as of September 30, 1995. On December 29, 1995, the venture
obtained a new first mortgage loan with an initial principal balance of
$20,000,000 and repaid the maturing obligation. Excess loan proceeds were
used to pay transaction costs and to establish certain required escrow
deposits, including an amount of $1.7 million designated to pay for certain
planned improvements and an expansion of the shopping center which were
completed in 1996. The new loan has a 10-year term, bears interest at a rate
of approximately 7.4% per annum and requires monthly principal and interest
payments based on a 20-year amortization schedule.
The joint venture agreement provides that the Partnership will receive
from cash flow, as defined, an annual cumulative preferred return, payable
monthly, of $1,047,000. In the event cash flow, as defined, was insufficient
to pay the Partnership's preference return described above through November
1, 1990, the co-venturer was required to fund to the joint venture a monthly
amount equal to the difference between $68,000 (the guaranteed preferred
return) and cash flow, as defined. During 1990, the venture partners reached
an agreement as to the cumulative deficiencies to be funded by the
co-venturer, which totalled $665,000. Cumulative total preference
distributions in arrears at September 30, 1996 amounted to $1,997,000 which
includes minimum guaranteed distributions in arrears of $308,000. The
minimum guaranteed distributions are accrued in the venture's financial
statements. However, the remaining unpaid preference return is payable only
from future cash flow or sale or refinancing proceeds. Accordingly, such
amounts are not accrued in the venture's financial statements.
The co-venturer is entitled to receive quarterly non-cumulative,
subordinated returns of $38,000. Due to insufficient cash flow, the
co-venturer received no distributions for any of the three years in the
period ended September 30, 1996. Any remaining cash flow, as defined, after
payments of the co-venturer's preference return, shall be distributed first
to the Initial Property Manager (an affiliate of the co-venturer) in an
amount equal to the then unpaid subordinated management fees from prior
fiscal years, then next to pay accrued interest on any loans made by the
Partnership and the co-venturer to the joint venture. The next $500,000 is
to be distributed 80% to the Partnership and 20% to the co-venturer. The
next $500,000 of cash flow in any year in excess of such returns will be
distributed 70% to the Partnership and 30% to the co-venturer and the
remaining balance is to be distributed 60% to the Partnership and 40% to the
co-venturer.
Taxable income or tax loss will be allocated to the Partnership and the
co-venturer in any year in the same proportions as the amount of cash
distributed to each of them and if no net cash flow has been distributed,
100% to the Partnership. Allocations of the venture's operations between the
Partnership and the co-venturer for financial accounting purposes have been
made in conformity with the allocations of taxable income or tax loss.
If additional cash is required for any reason in connection with
operations of the Joint Venture, it will be provided 70% by the Partnership
and 30% by the co-venturer (operating loans). The rate of interest on such
loans shall equal the lesser of the rate announced by the First National
Bank of Boston as its prime or the maximum rate of interest permitted by
applicable law. In the event a partner shall default in its obligation to
make an operating loan, the other partner may make all or part of the loan
required to be made by the defaulting partner (default loan). Each default
loan shall provide for the accrual of interest at the rate equal to the
lesser of twice the operating loan rate or the maximum rate of interest
permitted by applicable law. Through September 30, 1996, the Partnership and
the co-venturer had made operating loans totalling $63,000 and $1,000,
respectively. In addition the Partnership had made default loans aggregating
$26,000 through September 30, 1996.
Distribution of sale and/or refinancing proceeds are to be as follows,
after making a provision for liabilities and obligations and to the extent
not previously returned to each partner: (1) payment of accrued interest and
operating notes payable to partners; (2) to the Partnership, the aggregate
amount of the Partnership's Preference Return that shall not have been
distributed, (3) to the Partnership, an amount equal to the Partnership's
gross investment, (4) the next $2,000,000 to the co-venturer, (5) to the
Initial Property Manager for any unpaid subordinated management fee that
shall have accrued, (6) the next $4,000,000 allocated to the Partnership and
to the co-venturer in the proportions 80% and 20%, respectively, (7) the
next $3,000,000 allocated to the Partnership and the co-venturer in the
proportions 70% and 30%, respectively, and (8) any remaining balance shall
be allocated to the Partnership and the co-venturer 70% and 30%,
respectively, until the Partnership receives an amount equal to all net
losses allocated to the Partnership for years through calendar 1989 in which
the maximum Federal income tax rate for individuals was less than 50% times
a percentage equal to 50% minus the weighted average maximum Federal income
tax rate for individuals in effect during such years plus a simple rate of
return added to each year's amount equal to 8% per annum. Thereafter, any
remaining balance shall be distributed to the Partnership and the
co-venturer 60% and 40%, respectively.
The joint venture entered into a property management contract with an
affiliate of the co-venturer, cancellable at the Partnership's option upon
the occurrence of certain events. The management fee is equal to 3% of the
gross receipts, as defined, of which 1.5% was subordinated to the payment of
the Partnership's minimum guaranteed distributions through November 1990.
5. Investment in 150 Broadway Office Building
The Partnership sold its 49% interest in the Bailey N.Y. Associates joint
venture on September 22, 1989. The sales price for the Partnership's
interest was $18,000,000 which was received in the form of $4,000,000 in
cash and a $14,000,000 second mortgage note receivable. The Partnership also
received a $1,000,000 promissory note in satisfaction of preferred returns
accrued but not paid during the term of the joint venture partnership. The
notes, which bore interest at 7% per annum, were originally payable in
quarterly installments of principal and interest of $280,000, beginning in
October of 1989, for the $14,000,000 note and in quarterly installments of
interest only, beginning in April of 1991, for the $1 million note. The
notes were due to mature in October of 1995.
In the third quarter of fiscal 1991, due to a deterioration in the
commercial real estate market in New York City which adversely affected
property operations, the borrower failed to make certain payments due under
the terms of the Partnership's second mortgage note and the $1 million
promissory note received as part of the 1989 sale agreement, as well as
payments due on first and third mortgages with unaffiliated third parties.
On July 22, 1991, in a defensive reaction to the commencement of foreclosure
proceedings by the first mortgagee, the borrower filed for protection under
Chapter 11 of the U. S. Bankruptcy Code. During fiscal 1993, the Partnership
agreed to a settlement agreement involving both the first mortgage lender
and the owner. Under the terms of the plan, which was approved by the
bankruptcy court and declared effective on June 15, 1993, the Partnership
received a new second mortgage loan in the principal amount of $6 million,
with base interest at 4.75% per annum, in satisfaction of its prior second
mortgage and promissory note in the combined face amount of approximately
$15 million which had a net carrying value of $2,000,000. The terms of the
plan required the Partnership to fund, by way of a separate note, an initial
amount of $800,000 to pay past due real estate taxes and to establish an
escrow reserve of $200,000 prior to December 31, 1993 for future cash flow
shortfalls of the property. This escrow reserve was funded in the first
quarter of fiscal 1994. Under the terms of the agreement, if the first
mortgagee made withdrawals from the escrow to cover any monthly debt service
shortfalls, the Partnership was required to replenish the escrow on a
quarterly basis or it would have forfeited its second mortgage position.
Subsequent to the final execution of the settlement plan, due to the
uncertainty which existed with regard to the future collection of amounts
owed under the terms of the Partnership's restructured $6 million second
mortgage loan, management determined that it would be appropriate to account
for the investment in the 150 Broadway Office Building on the cost method.
Accordingly, the Partnership recorded a provision for possible uncollectible
amounts of $2,000,000 in fiscal 1993 to write off the remaining carrying
value of the original notes receivable received from the sale of the
Partnership's joint venture interest. The cost basis of the Partnership's
investment in the 150 Broadway Office Building was established at $800,000
as of September 30, 1993, which represented the amount of the additional
investment required to affect the bankruptcy court settlement plan in fiscal
1993. Under the cost method, any amounts received as interest on the note or
advances were recorded as income when received. Any advances required to
maintain the Partnership's investment interest in the 150 Broadway Office
Building were recorded as an expense in the period paid.
The value of the 150 Broadway Office Building was estimated to be well
below the balance of the $26 million first mortgage loan which was senior to
the Partnership's claims. Given the likelihood that large capital advances
would be required to keep the first mortgage loan current and avoid
foreclosure, management concluded during fiscal 1994 that it would not be
prudent to fund any further advances related to this investment. In light of
these circumstances and the resulting uncertainty that the Partnership would
realize any amounts from its investment interest in 150 Broadway, the
Partnership recorded provisions for possible investment loss totalling
$800,000 during fiscal 1994 to fully reserve the remaining carrying value of
the investment as of September 30, 1994. Management's discussions with the
borrower concerning the operations of the 150 Broadway property during
fiscal 1994 resulted in an offer to purchase the Partnership's second
mortgage loan position. During the quarter ended December 31, 1994, the
Partnership agreed to assign its second mortgage interest to an affiliate of
the borrower in return for a payment of $400,000. Subsequently, the borrower
was unable to perform under the terms of this agreement and the Partnership
agreed to reduce the required cash compensation to $300,000. During the
quarter ended March 31, 1995, the Partnership received $200,000 of the
agreed upon sale proceeds. The remaining $100,000 was funded into an escrow
account on May 31, 1995, to be released upon the resolution of certain
matters between the borrower and the first mortgage holder, but in no event
later than June 10, 1996. The Partnership recorded income of $200,000 in
fiscal 1995 to reflect the non-refundable cash proceeds received. During
fiscal 1996, the borrower and the first mortgage lender resolved their
remaining issues and released the $100,000 plus accrued interest to the
Partnership. The $100,000 was recognized as income in fiscal 1996. With the
release of the escrowed funds, the Partnership's interest in and any
obligations related to the 150 Broadway Office Building were terminated.
6. Legal Proceedings
In November 1994, a series of purported class actions (the "New York
Limited Partnership Actions") were filed in the United States District Court
for the Southern District of New York concerning PaineWebber Incorporated's
sale and sponsorship of various limited partnership investments, including
those offered by the Partnership. The lawsuits were brought against
PaineWebber Incorporated and Paine Webber Group Inc. (together
"PaineWebber"), among others, by allegedly dissatisfied partnership
investors. In March 1995, after the actions were consolidated under the
title In re PaineWebber Limited Partnership Litigation, the plaintiffs
amended their complaint to assert claims against a variety of other
defendants, including Sixth Income Properties Fund, Inc. and Properties
Associates 1985, L.P. ("PA1985"), which are the General Partners of the
Partnership and affiliates of PaineWebber. On May 30, 1995, the court
certified class action treatment of the claims asserted in the litigation.
The amended complaint in the New York Limited Partnership Actions alleged
that, in connection with the sale of interests in Paine Webber Income
Properties Six Limited Partnership, PaineWebber, Sixth Income Properties
Fund, Inc. and PA1985 (1) failed to provide adequate disclosure of the risks
involved; (2) made false and misleading representations about the safety of
the investments and the Partnership's anticipated performance; and (3)
marketed the Partnership to investors for whom such investments were not
suitable. The plaintiffs, who purported to be suing on behalf of all persons
who invested in Paine Webber Income Properties Six Limited Partnership, also
alleged that following the sale of the partnership interests, PaineWebber,
Sixth Income Properties Fund, Inc. and PA1985 misrepresented financial
information about the Partnership's value and performance. The amended
complaint alleged that PaineWebber, Sixth Income Properties Fund, Inc. and
PA1985 violated the Racketeer Influenced and Corrupt Organizations Act
("RICO") and the federal securities laws. The plaintiffs sought unspecified
damages, including reimbursement for all sums invested by them in the
partnerships, as well as disgorgement of all fees and other income derived
by PaineWebber from the limited partnerships. In addition, the plaintiffs
also sought treble damages under RICO.
<PAGE>
In January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in the New York Limited Partnership Actions outlining the terms
under which the parties have agreed to settle the case. Pursuant to that
memorandum of understanding, PaineWebber irrevocably deposited $125 million
into an escrow fund under the supervision of the United States District
Court for the Southern District of New York to be used to resolve the
litigation in accordance with a definitive settlement agreement and plan of
allocation. On July 17, 1996, PaineWebber and the class plaintiffs submitted
a definitive settlement agreement which has been preliminarily approved by
the court and provides for the complete resolution of the class action
litigation, including releases in favor of the Partnership and the General
Partners, and the allocation of the $125 million settlement fund among
investors in the various partnerships at issue in the case. As part of the
settlement, PaineWebber also agreed to provide class members with certain
financial guarantees relating to some of the partnerships. The details of
the settlement are described in a notice mailed directly to class members at
the direction of the court. A final hearing on the fairness of the proposed
settlement was held in December 1996, and a ruling by the court as a result
of this final hearing is currently pending.
In February 1996, approximately 150 plaintiffs filed an action entitled
Abbate v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiffs' purchases of various limited partnership interests, including
those offered by the Partnership. The complaint alleged, among other things,
that PaineWebber and its related entities committed fraud and
misrepresentation and breached fiduciary duties allegedly owed to the
plaintiffs by selling or promoting limited partnership investments that were
unsuitable for the plaintiffs and by overstating the benefits, understating
the risks and failing to state material facts concerning the investments.
The complaint sought compensatory damages of $15 million plus punitive
damages against PaineWebber.
In June 1996, approximately 50 plaintiffs filed an action entitled
Bandrowski v. PaineWebber Inc. in Sacramento, California Superior Court
against PaineWebber Incorporated and various affiliated entities concerning
the plaintiff's purchases of various limited partnership interests,
including those offered by the Partnership. The complaint is substantially
similar to the complaint in the Abbate action described above, and sought
compensatory damages of $3.4 million plus punitive damages.
Mediation with respect to the Abbate and Bandrowski actions described
above was held in December 1996. As a result of such mediation, a tentative
settlement between PaineWebber and the plaintiffs was reached which would
provide for complete resolution of both actions. PaineWebber anticipates
that releases and dismissals with regard to these actions will be received
by February 1997.
Under certain limited circumstances, pursuant to the Partnership Agreement
and other contractual obligations, PaineWebber affiliates could be entitled
to indemnification for expenses and liabilities in connection with the
litigation described above. However, PaineWebber has agreed not to seek
indemnification for any amounts it is required to pay in connection with the
settlement of the New York Limited Partnership Actions. At the present time,
the General Partners cannot estimate the impact, if any, of the potential
indemnification claims on the Partnership's financial statements, taken as a
whole. Accordingly, no provision for any liability which could result from
the eventual outcome of these matters has been made in the accompanying
financial statements.
7. Subsequent Event
On November 15, 1996, the Partnership distributed $300,000 to the Limited
Partners, $3,000 to the General Partners and $13,000 to the Adviser as an
asset management fee for the quarter ended September 30, 1996.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
Paine Webber Income Properties Six Limited Partnership:
We have audited the accompanying combined balance sheets of the Combined
Joint Ventures of Paine Webber Income Properties Six Limited Partnership as of
September 30, 1996 and 1995, and the related combined statements of income and
changes in venturers' capital, and cash flows for each of the three years in the
period ended September 30, 1996. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
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 combined financial statements referred to above
present fairly, in all material respects, the combined financial position of the
Combined Joint Ventures of Paine Webber Income Properties Six Limited
Partnership at September 30, 1996 and 1995, and the combined results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
/S/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
Boston, Massachusetts
November 8, 1996
<PAGE>
COMBINED JOINT VENTURES OF
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
COMBINED BALANCE SHEETS
September 30, 1996 and 1995
(In thousands)
ASSETS
1996 1995
---- ----
Current assets:
Cash and cash equivalents $ 630 $ 480
Prepaid expenses 117 39
Accounts receivable - affiliates 17 21
Accounts receivable from tenants and others 125 74
Cash reserve for capital expenditures 1,061 512
Cash reserve for insurance and taxes 147 297
--------- --------
Total current assets 2,097 1,423
Cash reserve for tenant security deposits 53 40
Capital contributions receivable from
Mall Corners III 665 665
Operating investment properties, at cost:
Land 9,938 9,845
Buildings, improvements and equipment 55,202 53,269
--------- --------
65,140 63,114
Less accumulated depreciation (21,119) (19,262)
--------- --------
Net operating investment properties 44,021 43,852
Deferred expenses, net of accumulated
amortization of $2,776 in 1996 and $3,119 in 1995 636 440
--------- --------
$ 47,472 $ 46,420
========= ========
LIABILITIES AND VENTURERS' CAPITAL
Current liabilities:
Distributions payable to venturers $ 761 $ 499
Notes payable to venturers 488 488
Advance from venturer - 200
Current portion of long-term debt 675 495
Accounts payable and accrued expenses 68 138
Accounts payable - affiliate 29 26
Accrued interest 768 711
Accrued real estate taxes 106 171
Other liabilities 115 102
--------- --------
Total current liabilities 3,010 2,830
Long-term debt 36,307 34,228
Tenant security deposits 269 269
Venturers' capital 7,886 9,093
--------- --------
$ 47,472 $ 46,420
========= ========
See accompanying notes.
<PAGE>
COMBINED JOINT VENTURES OF
PAINEWEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
COMBINED STATEMENTS OF INCOME AND CHANGES IN VENTURERS' CAPITAL
For the years ended September 30, 1996, 1995 and 1994
(In thousands)
1996 1995 1994
---- ---- ----
Revenues:
Rental income and expense
reimbursements $ 9,414 $ 9,122 $ 9,482
Interest income 41 26 26
--------- --------- --------
9,455 9,148 9,508
Expenses:
Interest 2,935 3,462 3,462
Depreciation and amortization 2,288 2,208 2,120
Property taxes 639 653 620
Insurance 118 137 137
Management fees 351 333 345
Maintenance and repairs 727 650 958
Utilities 554 519 564
General and administrative 335 270 245
Salaries 606 560 505
Other 28 34 30
--------- --------- --------
8,581 8,826 8,986
--------- --------- --------
Net income 874 322 522
Distributions to venturers (2,081) (1,296) (1,989)
Venturers' capital, beginning of year 9,093 10,067 11,534
--------- --------- --------
Venturers' capital, end of year $ 7,886 $ 9,093 $ 10,067
========= ========= ========
See accompanying notes.
<PAGE>
COMBINED JOINT VENTURES OF
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CASH FLOWS
For the years ended September 30, 1996, 1995 and 1994
Increase (Decrease) in Cash
(In thousands)
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income $ 874 $ 322 $ 522
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,288 2,208 2,120
Amortization of deferred
financing costs 34 - -
Changes in assets and liabilities:
Prepaid expenses (66) 2 55
Accounts receivable - affiliates 4 (6) (15)
Accounts receivable from tenants
and others (51) 9 71
Cash reserve for capital expenditures (549) 122 (92)
Cash reserve for insurance and taxes 138 (23) (44)
Cash reserve for tenant security deposits (13) (20) (12)
Accounts payable and accrued expenses (69) 25 14
Accounts payable - affiliates 3 (2) (9)
Accrued interest 57 (12) 46
Accrued real estate taxes (65) 7 (158)
Other liabilities 13 9 38
Tenant security deposits 1 (8) 5
------- ------- -------
Total adjustments 1,725 2,311 2,019
------- ------- -------
Net cash provided by operating
activities 2,599 2,633 2,541
------- ------- -------
Cash flows from investing activities:
Additions to operating investment
properties (2,218) (1,029) (746)
Payment of lease commissions (171) (67) (55)
Proceeds from insurance settlement - - 379
Funding of renovation escrow account - (500) -
------- -------- --------
Net cash used in investing
activities (2,389) (1,596) (422)
------- -------- --------
Cash flows from financing activities:
Distributions to venturers (1,819) (1,406) (1,948)
Proceeds from issuance of long-term
debt 20,000 9,000 -
Debt acquisition costs (499) (372) -
Advances from venturers - 200 -
Principal payments on long-term debt (17,742) (8,592) (182)
------- ------- -------
Net cash used in financing
activities (60) (1,170) (2,130)
------- ------- -------
Net increase (decrease) in cash and
cash equivalents 150 (133) (11)
Cash and cash equivalents,
beginning of year 480 613 624
------- ------- --------
Cash and cash equivalents, end of year $ 630 $ 480 $ 613
======= ======= ========
Cash paid during the year for interest $ 2,844 $ 3,515 $ 3,421
======= ======= ========
See accompanying notes.
<PAGE>
COMBINED JOINT VENTURES OF
PAINE WEBBER INCOME PROPERTIES SIX
LIMITED PARTNERSHIP
Notes to Combined Financial Statements
1. Organization and Nature of Operations
The accompanying financial statements of the Combined Joint Ventures of
Paine Webber Income Properties Six Limited Partnership (PWIP6) include the
accounts of PWIP6's three unconsolidated joint venture investees as of
September 30, 1996. Gwinnett Mall Corners Associates, a Georgia general
partnership, was organized on August 28, 1985, by PWIP6 and Mall Corners
III, Ltd., a Georgia limited partnership (MC III), to acquire and operate a
304,000 square foot shopping center located in Gwinnett County, Georgia.
Regent's Walk Associates was organized on April 25, 1985 in accordance with
a joint venture agreement between PWIP6 and Peterson Interests of Kansas,
Inc. (PIK). The joint venture was organized to purchase and operate a
255-unit apartment complex known as Regent's Walk Apartments in Overland
Park, Kansas. The apartment complex was purchased on May 15, 1985.
Kentucky-Hurstbourne Associates was organized on July 25, 1985 in accordance
with a joint venture agreement between PWIP6 and Hurstbourne Apartments
Company, Ltd. (Limited Partnership). The joint venture was organized to
purchase and operate a 409-unit apartment complex known as Hurstbourne,
Kentucky. The financial statements of the Combined Joint Ventures are
presented in combined form due to the nature of the relationship between the
co-venturers and PWIP6, which owns a majority financial interest but does
not have voting control in each joint venture.
2. Use of Estimates and Summary of Significant Accounting Policies
The accompanying combined financial statements have been prepared on the
accrual basis of accounting in accordance with generally accepted accounting
principles which require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of September 30, 1996 and 1995 and
revenues and expenses for each of the three years in the period ended
September 30, 1996. Actual results could differ from the estimates and
assumptions used.
Basis of presentation
---------------------
The records of two of the combined joint ventures, Gwinnett Mall Corners
Associates and Kentucky-Hurstbourne Associates, are maintained on an income
tax basis of accounting and adjusted to generally accepted accounting
principles and reflect the necessary adjustments, principally to
depreciation and amortization. The records of Regent's Walk Associates are
maintained in accordance with generally accepted accounting principles.
Revenue Recognition
-------------------
The Combined Joint Ventures lease space at the operating investment
properties under short-term and long-term operating leases. Rental revenues
are recognized on a straight-line basis as earned pursuant to the terms of
the leases.
Operating investment properties
-------------------------------
The operating investment properties are carried at the lower of cost,
reduced by accumulated depreciation, or net realizable value. The net
realizable value of a property held for long-term investment purposes is
measured by the recoverability of the venture's investment through expected
future cash flows on an undiscounted basis, which may exceed the property's
market value. The net realizable value of a property held for sale
approximates its current market value. All of the operating properties owned
by the Combined Joint Ventures were held for long-term investment purposes
as of September 30, 1996 and 1995.
The Combined Joint Ventures have reviewed FAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed
Of," which is effective for financial statements for years beginning after
December 15, 1995, and believe this new pronouncement will not have a
material effect on the Combined Joint Ventures' financial statements.
Depreciation expense is computed on the straight-line basis over the
estimated useful life of the buildings, equipment and tenant improvements,
generally 5 to 30 years. Payments made to PWIP6 under a master lease
agreement to guarantee a preference return were recorded as reductions of
the basis of the Mall Corners operating investment property. Professional
fees, including acquisition fees paid to a related party (Note 3), and other
costs have been capitalized and are included in the cost of the operating
investment properties.
<PAGE>
Income tax matters
------------------
The Combined Joint Ventures are not subject to U.S. federal or state
income taxes. The partners report their proportionate share of the joint
venture's taxable income or tax loss in their respective tax returns;
therefore, no provision for income taxes is included in the accompanying
financial statements.
Deferred expenses
-----------------
Lease commissions are being amortized over the shorter of ten years or the
remaining term of the related lease on a straight-line basis. Permanent loan
fees and related debt acquisition costs are being amortized on the
straight-line method over the term of the related mortgage loans.
Organization costs represent legal fees associated with the formation of the
joint venture and were amortized over five years on a straight-line basis.
Cash and cash equivalents
-------------------------
For purposes of reporting cash flows, the Combined Joint Ventures consider
all highly liquid investments with original maturities of 90 days of less to
be cash equivalents.
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts of cash and cash equivalents, accounts receivables,
reserved cash, accounts payable and accrued liabilities approximate their
fair values due to the short-term maturities of these instruments. It is not
practicable for management to estimate the fair value of the receivable from
Mall Corners III or notes payable to venturer without incurring excessive
costs because the obligations were provided in non-arms's length
transactions without regard to fixed maturities, collateral issues or other
traditional conditions and covenants. The fair value of long-term debt is
estimated, where applicable, using discounted cash flow analyses, based on
the current market rate for similar types of borrowing arrangements (see
Note 6).
3. Partnership Agreements and Related Party Transactions
Gwinnett Mall Corners Associates
--------------------------------
The Mall Corners joint venture agreement provides that PWIP6 will receive
from cash flow, as defined, a annual cumulative preferred return, payable
monthly, of $1,047,000. In the event cash flow, as defined, was insufficient
to pay the PWIP6 preference return described above through November 1, 1990,
MC III was required to fund the joint venture a monthly amount equal to the
difference between $68,000 (the guaranteed preferred return) and cash flow,
as defined. PWIP6 and MC III were in disagreement as to the amount of
deficiencies to be funded by MC III through September 30, 1989. During 1990,
the partners reached an agreement as to the cumulative deficiencies to be
funded by MC III. This agreement resulted in a decrease to the receivable
from MC III and a decrease in MC III's capital of $245,000. The joint
venture made distributions to PWIP6 of $1,047,000 in fiscal 1996. Cumulative
preferred distributions in arrears at September 30, 1996 amounted to
approximately $1,997,000 including minimum guaranteed distributions in
arrears of $308,000. The minimum guaranteed distributions are accrued in the
accompanying financial statements. However, the remainder of the cumulative
preferred distributions are payable only from future cash flow or sale or
refinancing proceeds. Accordingly, such amounts are not accrued in the
accompanying financial statements.
The receivable from MC III totaled $665,000 at September 30, 1996 and
1995. The receivable is guaranteed by the partners of MC III, however, the
venture is subject to credit loss to the extent the guarantors are unable to
fulfill their obligation. The venture does not anticipate nonperformance by
MC III due to their interest in the venture and the underlying value of the
venture's assets.
MC III is entitled to receive quarterly non-cumulative, subordinated
returns of $38,000 each quarterly period, subject to available cash flow.
Due to insufficient cash flow, MC III received no distributions for any of
the three years in the period ended September 30, 1996. Any remaining cash
flow, as defined, after payment of MC III's preferred return, is to be
distributed to the Initial Property Manager (an affiliate of MC III) in an
amount equal to the then unpaid subordinated management fees from prior
fiscal years, then next to pay accrued interest on any loans made by PWIP6
and MC III to the joint venture. The next $500,000, if any, is to be
distributed 80% to PWIP6 and 20% to MC III, the second $500,000, if any, is
to be distributed 70% to PWIP6 and 30% to MC III and the remaining balance,
if any, is to be distributed 60% to PWIP6 and 40% to MC III.
<PAGE>
Taxable income or tax loss is allocated to PWIP6 and MC III based on the
proportionate percentage of net cash flow distributed; if no net cash flow
has been distributed, 100% to PWIP6. Allocations of the joint venture's
operations between PWIP6 and MC III for financial reporting purposes have
been made in conformity with the allocations of taxable income or tax loss.
If additional cash is required for any reason in connection with
operations of the joint venture, it is to be provided 70% by PWIP6 and 30%
by MC III in the form of operating loans. The rate of interest shall equal
the lesser of the rate announced by the First National Bank of Boston as its
prime rate or the maximum rate of interest permitted by applicable law. In
the event a partner shall default in its obligation to make an operating
loan, the other partner may make all or part of the loan required to be
made by the defaulting partner (default loan). Each default loan shall
provide for the accrual of interest at the rate equal to the lesser of twice
the operating loan rate or the maximum rate of interest permitted by
applicable law. PWIP6 made a temporary advance of $200,000 to the venture
during fiscal 1995 to fund a good faith deposit required in connection with
the refinancing transaction described in Note 6. Such funds were returned to
PWIP6 in fiscal 1996 subsequent to the closing of the refinancing
transaction. There were no operating/default loans required in fiscal 1996
or 1995. Operating/default loans of $89,000 were required in fiscal years
prior to 1990 (see Note 5). Total interest incurred and expensed for these
loans amounted to $12,000 in each of the last three fiscal years. The total
accrued interest payable on the loans at September 1996 and 1995 was $99,000
and $88,000, respectively.
Distribution of sale and/or refinancing proceeds are to be as follows,
after making a provision for liabilities and obligations and to the extent
not previously returned to each partner: (1) payment of accrued interest and
operating notes payable to partners (2) to PWIP6, the aggregate amount of
the PWIP6 Preference Return that shall not have been distributed, (3) to
PWIP6, an amount equal to PWIP6's gross investment, (4) the next
$2,000,000 to MC III, (5) to the Initial Property Manager, as defined below,
for any unpaid subordinated management fees that shall have accrued, (6) the
next $4,000,000 allocated to PWIP6 and MC III in the proportions 80% and
20%, respectively, (7) the next $3,000,000 allocated to PWIP6 and MC III in
the proportions of 70% and 30%, respectively, and (8) any remaining balance
shall be allocated to PWIP6 and MC III 70% and 30%, respectively, until
PWIP6 receives an amount equal to all net losses allocated to PWIP6 for the
years through calendar 1989 in which the maximum Federal income tax rate for
individuals was less than 50% times a percentage equal to 50% minus the
weighted average maximum federal income tax rate for individuals in effect
during such years plus a simple rate of return added to each year's amount
equal to 8% per annum. Thereafter, any remaining balance shall be
distributed to PWIP6 and MC III in the ratios of 60% and 40%, respectively.
The joint venture has entered into a property management contract with an
affiliate of MC III (the Initial Property Manager), cancellable at PWIP6's
option upon the occurrence of certain events. The management fee is equal to
3% of gross rents, as defined, of which 1.5% was subordinated to the receipt
by PWIP6 of its guaranteed preferred return through November 1990.
Management fees incurred in 1996, 1995 and 1994 were $97,000, $94,000 and
$106,000, respectively. The property manager has provided maintenance and
leasing services to the joint venture totalling $199,000, $105,000 and
$76,000 in 1996, 1995 and 1994, respectively.
PaineWebber Properties Incorporated, the adviser to PWIP6 and an affiliate
of Paine Webber Incorporated, received an acquisition fee of $579,000 in
connection with PWIP6's original investment in the joint venture and the
acquisition of the property.
Included in buildings and deferred expenses are $1,047,000 and $115,000,
respectively of costs paid to the Initial Property Manager prior to the
formation of the joint venture. These costs have been recorded as part of
the basis of the assets contributed to the joint venture by MC III as its
capital contribution. Pursuant to the joint venture agreement, MC III was
required to fund initial tenant improvements and lease commissions through
capital contributions.
In accordance with the joint venture agreement, certain amounts of cash
have been appropriated and are restricted as to use. Pursuant to the joint
venture agreement, an initial amount of $15,000 plus 1% of gross rental
revenue thereafter, are to be allocated to the reserve for capital
expenditures. The reserve was underfunded by approximately $115,000 and
$86,000 at September 30, 1996 and 1995, respectively (see Note 5). No
amounts are required to be allocated at any time the reserve balance exceeds
$250,000. The venture's reserve for insurance and real estate taxes was
underfunded by approximately $48,000 and $53,000 at September 30, 1996 and
1995, respectively.
<PAGE>
Regent's Walk Associates
------------------------
The Regent's Walk joint venture agreement provides that PWIP6 will receive
from cash flow a cumulative preferred return, payable quarterly, of
$164,000. Commencing June 1, 1988, after PWIP6 has received its cumulative
preferred return, PIK is entitled to a preference return of $7,000 for each
fiscal quarter which is cumulative only for amounts due in any one fiscal
year. Any remaining cash flow is to be used to pay interest on any notes
from the venturers and then is to be distributed to the partners, with PWIP6
receiving 90% of the first $200,000, 80% of the next $200,000 and 70% of any
remainder.
During the year ended September 30, 1996, PWIP6's preferred return
amounted to $656,000, while net cash available for distribution amounted to
$551,000. The total unpaid cumulative preferred return payable to PWIP 6
amounted to $2,825,000 as of September 30, 1996. Such amount is payable only
in the event that sufficient future cash flow or sale or refinancing
proceeds are available. Accordingly, the unpaid preferred return has not
been accrued in the accompanying financial statements.
Income or loss is to be allocated to the partners based on their
proportionate share of cash distributions.
Under the terms of the venture agreement, PIK was required to make loans
to the joint venture up to a total of $250,000 for additional cash needed by
the joint venture for any reason including payment of the PWIP6 preference
return, prior to June 1, 1992. After the joint venture has borrowed $250,000
from PIK, if the joint venture requires additional funds for purposes other
than distributions, then it will be provided 90% by PWIP6 and 10% by PIK
(see Note 5).
Distribution of sale and/or refinancing proceeds will be distributed as
follows, after making a provision for liabilities and obligations: (1)
repayment to PIK of up to $250,000 of operating loans plus accrued interest
thereon, (2) payment of accrued interest and repayment of principal of
operating notes (pro-rata), (3) payment to PWIP6 of any preferred return
arrearage, (4) to PWIP6, an amount equal to PWIP6's gross investment plus
$560,000, (5) to PIK, the amount of $500,000, (6) to payment of a brokers
fee to the partners if a sale is made to a third party, (7) to the payment
of up to $100,000 of subordinated management fees, (8) the next $8,000,000
to PWIP6 and PIK in the proportions of 90% and 10%, respectively, (9) the
next $4,000,000 to PWIP6 and PIK in the proportions of 80% and 20%,
respectively, and (10) any remaining balance 70% to PWIP6 and 30% to PIK.
The venture agreement provides for a capital reserve account to be used
solely for specified enhancement programs, capital expenditures, or at the
discretion of PWIP6 up to $150,000 of capital or operating expenses of the
joint venture. Such account was established in the initial amount of
$845,000 and was funded from partner capital contributions. An additional
$124,000 was added by capital contributions from PWIP6 during the year ended
September 30, 1986; $49,000 was added by partners' loans in 1987, and
$100,000 was added by partners' loans in 1988. Beginning in January 1991,
for each month of operations an amount equal to 3% of the total amount of
estimated operating expenses in the budget as approved by the partners, is
to be added to the reserve. During the period October 1, 1991 through
September 30, 1996, capital expenditures exceeded required deposits to the
reserve and therefore no additions to the reserve have been made during this
most recent three-year period. At September 30, 1996 and 1995, the balance
in the reserve account was $11,000 and was invested in a savings account.
The joint venture entered into a property management contract with an
affiliate ("property manager") of PIK. The management fee was 4% of gross
rents, as defined until June 1, 1990 when the fee increased to 5% of gross
rents. Subsequent to June 1, 1988, that portion of the fees representing 1%
of gross rents shall be payable only to the extent of cash flow remaining
after PWIP6 has received its preferred return. Any payments not made
pursuant to the above are payable only out of sale or refinancing proceeds
as specified in the agreement. As of September 30, 1996, deferred management
fees exceed the $100,000 limitation referred to above.
At September 30, 1996 and 1995, $8,000 was due to the property manager for
management fees. For the years ended September 30, 1996, 1995 and 1994
property management fees totalled $103,000, $97,000 and $98,000,
respectively. During 1996, 1995 and 1994, management fees of $25,000,
$24,000 and $24,000, respectively, were subordinated as described above.
PaineWebber Properties Incorporated, the advisor to PWIP6 and an affiliate
of PaineWebber Incorporated, was paid an acquisition fee of $390,000 in
connection with PWIP6's investment in the joint venture.
<PAGE>
Kentucky - Hurstbourne Associates
---------------------------------
The Hurstbourne joint venture agreement as amended on May 21, 1986
provides that cash flow shall first be distributed to PWIP6 in the amount of
$67,000 per month (PWIP6 preference return). The preference return is
cumulative on a year to year basis through July 31, 1989 and is cumulative
on a month-to-month basis, not annually, thereafter. The next $40,000 each
year will be distributed to the Limited Partnership on a noncumulative
annual basis, payable quarterly (Limited Partnership preference return).
At the end of each fiscal year, any cash flow not previously distributed
will be applied in the following order: first, to the payment of all unpaid
accrued interest on all outstanding operating notes; the next $225,000 of
annual cash flow will be distributed 90% to PWIP6 and 10% to the Limited
Partnership; the next $260,000 of annual cash flow will be distributed 80%
to PWIP6 and 20% to the Limited Partnership, and any remaining balance will
be distributed 70% to PWIP6 and 30% to the Limited Partnership.
After the end of each month, during a year in which PWIP6 has not received
their cumulative preference return, the venture shall distribute to the
PWIP6 the lesser of (a) the excess, if any, of the cumulative PWIP6
preference return over the aggregate amount of net cash flow previously
distributed to PWIP6 during the year or (b) any net cash flow distributed to
the Limited Partnership during the year.
The cumulative preference return of PWIP6 in arrears at September 30, 1996
for unpaid preference returns through July 31, 1989 is approximately
$1,354,000. Under the terms of the venture agreement, any unpaid returns
will only be paid upon refinancing, sale, exchange or other disposition of
the property. Unpaid preference returns are, therefore, not reflected in the
financial position of the joint venture.
The taxable income or tax losses of the joint venture will be allocated to
PWIP6 and the Limited Partnership in proportion to the distribution of net
cash flow, provided that the Limited Partnership shall not be allocated less
than ten percent of the taxable net income or tax losses, and the Limited
Partnership shall not be allocated net profits in excess of net cash flow
distributed to it during the fiscal year.
Any proceeds arising from a refinancing, sale, exchange or other
disposition of property will be distributed first to the payment of unpaid
principal and accrued interest on any outstanding notes. Any remaining
proceeds will be distributed in the following order: repayment of unpaid
principal and accrued interest on all outstanding operating notes to PWIP6
and the Limited Partnership; the amount of any undistributed preference
payments to PWIP6 (for the period through July 31, 1989); $10,056,000 to
PWIP6; $684,000 to the Limited Partnership; the amount of any unpaid
subordinated management fees to the property manager; $9,000,000 distributed
90% to PWIP6 and 10% to the Limited Partnership; $4,500,000 distributed 80%
to PWIP6 and 20% to the Limited Partnership; with any remaining balance
distributed 70% to PWIP6 and 30% to the Limited Partnership.
If additional cash is required in connection with the joint venture, it
may be provided by PWIP6 and the Limited Partnership as loans (evidenced by
operating notes) to the venture. Such loans would be provided 90% by PWIP6
and 10% by the Limited Partnership. No such loans were outstanding as of
September 30, 1996.
The venture has a property management contract with an affiliate (property
manager) of the Limited Partnership. The management fee to the property
manager is 5% of gross rents. Through July 30, 1988, 40% of the manager's
fee was subordinated to receipt by PWIP6 and the Limited Partnership of
their preference returns. At September 30, 1996 and 1995, cumulative
subordinated management fees were approximately $118,000. Under terms of the
venture agreement and as stated in Note 3, unpaid subordinated management
fees will only be paid upon refinancing, sale, exchange or other disposition
of the property.
An amount receivable from the property manager of $18,000 at September 30,
1996 and $21,000 at September 30, 1995, represents the balances in an
intercompany account maintained between the property manager and the joint
venture and are included in accounts payable - affiliates on the
accompanying balance sheets. For the years ended September 30, 1996, 1995
and 1994 property management fees totaled $152,000, $142,000 and $141,000,
respectively.
PaineWebber Properties Incorporated, the advisor to PWIP6 and an affiliate
of PaineWebber Incorporated, was paid an acquisition fee of $500,000 in
connection with PWIP6's investment in the joint venture.
<PAGE>
4. Leasing Activities
The Gwinnett Mall Corners joint venture derives its income from
noncancellable operating leases which expire on various dates through the
year 2004. The operating property was approximately 90% leased as of
September 30, 1996. The approximate future minimum lease payments to be
received under noncancellable operating leases in effect as of September 30,
1996 are as follows (in thousands):
Year ending September 30:
-------------------------
1997 $ 3,295
1998 3,012
1999 2,763
2000 2,408
2001 1,820
Thereafter 6,149
--------
$ 19,447
========
Two of the venture's tenants individually comprise more than 10% of the
venture's fiscal 1996 base rental income. These tenants operate in the
clothing and household retailing and the furniture retailing industries. In
addition, four of the venture's tenants individually comprise more than 10%
of the Partnership's total future minimum rents. Their industry and future
minimum rents are as follows (in thousands):
Clothing and household retailer $4,662
Craft supply retailer $2,212
Cinema $2,057
Furniture retailer $1,956
5. Notes Payable to Venturers
Notes payable to the venturers of Gwinnett Mall Corners Associates
represent operating/default loans received from PWIP6 and MC III for
operating purposes and consist of the following at September 30, 1996 and
1995 (in thousands):
Total Operating Default
----- --------- -------
Due to PWIP6 $ 88 $ 62 $ 26
Due to MC III 1 1 -
---- ---- ----
$ 89 $ 63 $ 26
==== ==== ====
Regarding Regent's Walk Associates, during the years ended September 30,
1988 and 1987, PIK loaned the venture $25,000 and $225,000, respectively,
under the terms of the venture agreement. Also, during those same years, the
venture partners advanced $100,000 and $49,000, respectively, for additional
renovation costs with PWIP6 providing 90% and PIK providing 10%.
Notes payable to venturers generally bear interest at the rate of prime
plus 1% (9.25% at September 30, 1996). Interest incurred and expensed on
notes payable to venturers for the years ended September 30, 1996, 1995 and
1994 totalled $37,000, $39,000 and $42,000, respectively.
6. Long-term Debt
Long-term debt consists of the following amounts (in thousands):
1996 1995
---- ----
Gwinnett Mall Corners Associates'
nonrecourse mortgage note secured
by a Deed to Secure Debt and
Security Agreement on the joint
venture's property; bore interest
at 11.5% per annum payable in
monthly installments of interest
only totalling $170 through
December 31, 1991. Thereafter, the
note was payable in monthly
installments of $175 including
principal and interest at 11.5%
through December 1, 1995. On
December 29, 1995, the note was
repaid with the proceeds of a new
loan. See discussion of refinancing
below. $ - $ 17,266
<PAGE>
Gwinnett Mall Corners Associates'
nonrecourse mortgage note secured
by a Deed to Secure Debt and
Security Agreement on the joint
venture's property. The note has a
term of 10 years, bears interest at
a rate of 7.4% per annum and
requires monthly principal and
interest payments based on a 20
year amortization schedule. The
loan matures on December 1, 2005.
The fair value of this note payable
approximated its carrying value as
of September 30, 1996. 19,700 -
Kentucky - Hurstbourne Associates'
nonrecourse promissory note secured
by the venture's operating
property; bore interest at 12.625%
through September 30, 1992. In
1992, the Partnership exercised an
option to extend the maturity date
of the loan to September 30, 1999
with a 7.695% interest rate.
Principal and interest payments of
$62 are due monthly, with a balloon
payment of $8,022 due at maturity.
The fair value of this note payable
approximated its carrying value as
of September 30, 1996. 8,361 8,457
Regent's Walk Associates'
nonrecourse first mortgage note
secured by the venture's operating
investment property. The first
mortgage loan bears interest at an
annual rate of 7.32% and requires
principal and interest payments of
$62 on a monthly basis through
maturity on October 1, 2000, at
which time a balloon payment of
$8,500 will be due. The fair value
of this note payable approximated
its carrying value as of September
30, 1996. 8,921 9,000
---------- ---------
36,982 34,723
Less current portion 675 495
---------- --------
$ 36,307 $ 34,228
========== ========
On December 29, 1995, Gwinnett Mall Corners Associates obtained a new
first mortgage loan with an initial principal balance of $20,000,000 and
repaid its maturing first mortgage loan obligation, which had an
outstanding balance of approximately $17,246,000 at the time of closing.
Excess loan proceeds were used to pay transaction costs and to establish
certain required escrow deposits, including an amount of $1.7 million
designated to pay for certain planned improvements and an expansion of the
shopping center which were completed in 1996.
Scheduled maturities of long-term debt for the next five years and
thereafter are as follows (in thousands):
1997 $ 675
1998 727
1999 8,805
2000 711
2001 9,153
Thereafter 16,911
---------
$ 36,982
=========
<PAGE>
<TABLE>
Schedule III - Real Estate and Accumulated Depreciation
COMBINED JOINT VENTURES
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
September 30, 1996
(In thousands)
<CAPTION>
Initial Cost to Gross Amount at Which Carried at Life on Which
Partnership Costs Close of period Depreciation
Buildings Capitalized Buildings, in Latest
Improvements (Removed) Improvements Income
& Personal Subsequent to & Personal Accumulated Date of Date Statement
Description Encumbrances Land Property Acquisition Land Property Total Depreciation Construction Acquired is Computed
----------- ------------ ---- -------- ----------- ---- -------- ----- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Center -
Gwinnett County,
GA $19,700 $ 7,039 $21,509 $2,327 $7,039 $23,835 $30,874 $ 9,184 1985 8/28/85 5 to 30 Yrs.
Apartment Complex -
Louisville, KY 8,361 1,654 14,996 1,343 1,807 16,186 17,993 5,943 1985 7/25/85 5 to 30 Yrs.
Apartment Complex -
Overland Park,
KS 8,921 1,092 13,922 1,258 1,092 15,181 16,273 5,992 1985 5/15/85 5 to 30 Yrs.
----- ----- ------ ----- ----- ------ ------ -----
$36,982 $ 9,785 $50,427 $4,928 $9,938 $55,202 $65,140 $21,119
======= ======= ======= ====== ====== ======= ======= =======
Notes
-----
(A) The aggregate cost of real estate owned at September 30, 1996 for Federal income tax purposes is approximately $55,615.
(B) See Note 5 of Notes to Combined Financial Statements for a description of the long-term mortgage debt encumbering the
operating investment properties.
(C) Reconciliation of real estate owned:
1996 1995 1994
---- ---- ----
Balance at beginning of year $63,114 $62,101 $61,355
Additions and improvements 2,218 1,029 746
Disposals and writedowns (192) (16) -
------- ------- -------
Balance at end of year $65,140 $63,114 $62,101
======= ======= =======
(D) Reconciliation of accumulated depreciation:
Balance at beginning of year $19,262 $17,292 $15,404
Depreciation expense 2,049 1,986 1,888
Disposals (192) (16) -
------- ------- -------
Balance at end of year $21,119 $19,262 $17,292
======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Partnership's audited financial statements for the year ended
September 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,218
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,218
<PP&E> 5,440
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,658
<CURRENT-LIABILITIES> 34
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,624
<TOTAL-LIABILITY-AND-EQUITY> 8,658
<SALES> 0
<TOTAL-REVENUES> 1,133
<CGS> 0
<TOTAL-COSTS> 351
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 782
<INCOME-TAX> 0
<INCOME-CONTINUING> 782
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 782
<EPS-PRIMARY> 12.89
<EPS-DILUTED> 12.89
</TABLE>
