<PAGE> 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 the fiscal year ended December 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-16857
Brauvin Income Properties L.P. 6
(Exact name of registrant as specified in its charter)
Delaware 36-1276801
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
(312) 443-0922
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of class)
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 .
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 ]
The aggregate sales price of the limited partnership interests of
the registrant (the "Units") to unaffiliated investors of the
registrant was $7,842,500. This does not reflect market value.
This is the price at which the Units were sold to the public.
There is no current market for these Units, nor have any of the
Units been sold within the last 60 days.
Portions of the Prospectus of the registrant dated May 30, 1986, as
supplemented September 3, 1986, October 28, 1986, December 30, 1986
and May 29, 1987 and filed pursuant to Rule 424(b) under the
Securities Act of 1933, as amended, are incorporated by reference
into Parts III and IV of this Annual Report on Form 10-K.
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
1995 FORM 10-K ANNUAL REPORT
INDEX
PART I
Page
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . .5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PART II
Item 5. Market for the Registrant's Limited Partnership
Interests and Related Security Holder Matters . . . . . . . . 12
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . 15
Item 8. Financial Statements and Supplementary Data . . . . . . . . . 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . 23
PART III
Item 10. Directors and Executive Officers of the Registrant. . . . . . 24
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . 27
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . . . 28
Item 13. Certain Relationships and Related Transactions. . . . . . . . 28
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 30
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
<PAGE>
PART I
Item 1. Business.
Brauvin Income Properties L.P. 6 (the "Partnership") is a
Delaware limited partnership formed in April 1986 whose business
has been devoted exclusively to acquiring, operating, holding for
investment and disposing of existing office buildings, shopping
centers and industrial and retail commercial buildings of a general
purpose nature, all in greater metropolitan areas.
The General Partners originally intended to dispose of the
Partnership's properties approximately six to nine years after
acquisition of each property, with a view toward liquidation of the
Partnership. Due to current real estate market conditions and
economic trends the General Partners instead believe it to be in
the best interest of the Partnership to retain the properties until
such time as the General Partners reasonably believe it is
appropriate to dispose of the Partnership's properties. In order
to make this determination, the General Partners periodically
evaluate market conditions. However, since the restated limited
partnership agreement (the "Agreement") provides that the
Partnership shall terminate December 31, 2025, unless sooner
terminated, the General Partners shall in no event dispose of the
properties after that date.
As of December 31, 1995, the Partnership had originally acquired three
rental properties. The Partnership had acquired a 46% interest in
a joint venture which acquired an additional rental property. This
property was sold in a sheriff's sale on May 15, 1995. The
Partnership will not purchase any additional properties.
Operations currently consist of operating the real estate
properties which have been managed by Brauvin Management Company,
Inc. (an affiliate of the General Partners). The focus of property
management activities has seen improvement in the economic
performance of the properties with the goal of maximizing value to
the Partnership upon disposition.
The Partnership has no employees.
Market Conditions/Competition
The Partnership faces active competition in all aspects of its
business and must compete with entities which own properties
<PAGE>
similar in type to those owned by the Partnership. Competition
exists in such areas as attracting and retaining creditworthy
tenants, financing capital improvements and eventually selling
properties. Many of the factors affecting the ability of the
Partnership to compete are beyond the Partnership's control, such
as softened markets caused by an oversupply of similar rental
facilities, declining performance in the local economy in which a
property is located, population shifts, reduced availability and
increased cost of financing, changes in zoning laws or changes in
patterns of the needs of users. The marketability of the
properties may also be affected by prevailing interest rates and
existing tax laws. The Partnership may be required to retain
ownership of its properties for periods longer than anticipated at
acquisition or it may refinance, sell or otherwise dispose of
certain properties at times or on terms and conditions that are
less advantageous than would otherwise be the case if such
unfavorable economic or market conditions did not exist.
The Partnership strives to maximize occupancy and, as such,
must adjust rents to attract and retain tenants. One measure
of a market's relative strength or weakness is the current rental
rate demanded by non-anchor tenants. These rates are for tenants
who generally sign leases of three to five years and are an indicator
of the "spot" rental market. There are currently no vacancies at the
Del Champs property located in Tuscaloosa, Alabama. Expectations are
that due to a stable economic environment, rental rates will remain
flat or increase slightly. The rental rates for tenants at the
Shoppes on the Parkway shopping center in Hilton Head, South Carolina
have increased from approximately $13.00 per square foot in 1993 to
approximately $17.00 per square foot in 1995.
The Partnership, by virtue of its ownership of real estate, is
subject to federal and state laws and regulations covering various
environmental issues. Management of the Partnership retains the
services of third parties who hold themselves out to be experts in
the field to assess a wide range of environmental issues and
conduct tests for environmental contamination. Management believes
that all real estate owned by the Partnership is in full compliance
with applicable environmental laws and regulations.
<PAGE>
Item 2.
Properties.
The following is a discussion of the rental properties owned and
operated by the Partnership during 1995. For the purpose of the
information disclosed in this section, the following terms are
defined as follows:
Occupancy Rate: The occupancy rate is defined as the occupied
square footage at December 31, divided by the total square footage
excluding square footage of outparcels, if any.
Average Annual Base Rent Per Square Foot: The average annual
base rent per square foot is defined as the total effective base
rental income for the year divided by the average square feet
occupied excluding outparcels, if any.
Average Square Feet Occupied: The average square feet occupied
is calculated by averaging the occupied square feet at the
beginning of the year with the occupied square feet at the end of
the year excluding outparcels, if any.
During the year ended December 31, 1995, the Partnership owned
the properties described below:
(a) Delchamps Plaza North Shopping Center ("Delchamps")
On November 12, 1987, the Partnership acquired Delchamps located
in Tuscaloosa, Alabama, for approximately $4,058,000. The purchase
was funded with approximately $715,000 in cash at closing and by
assuming an existing first mortgage loan from Lincoln National Life
Insurance Company. The mortgage had an original principal balance
of $3,375,000 and a balance of $3,343,000 in November 1987. The
loan bears interest at a rate of 9.375% per annum and matures on
December 1, 1996. It is the General Partners' intention to
refinance this loan when it matures and, in that regard, there have
been initial conversations with the current lender. There is no
assurance that the General Partners will be successful in their
refinancing efforts in which case the Partnership would sustain a
loss upon foreclosure.
Delchamps is a community shopping center constructed in 1986
with approximately 59,400 rentable square feet on a seven acre
site. Delchamps is anchored by a regional grocer named Delchamps
<PAGE>
and Harco Drug, a Tuscaloosa based drug store chain.
Delchamps has eight stores and was 100% occupied at December 31,
1995.
The occupancy rate and average annual base rent per square foot
at December 31 for the last five years are as follows:
1995 1994 1993 1992 1991
Occupancy Rate 100% 100% 95% 100% 100%
Average Annual Base
Rent Per Square Foot $7.73 $7.69 $7.82 $7.72 $7.71
Delchamps has two tenants which individually occupy ten percent
or more of the rentable square footage. The following is a summary
of the tenant rent roll at December 31, 1995:
Annual Lease
Square Base Expiration Renewal Nature of
Tenant Feet Rent Date Options Business
Delchamps 42,057 $315,427 1/2007 4/5 years ea. Grocery
Store
Harco Drugs 9,800 73,500 1/2002 4/5 years ea. Drug
Store
Others 7,532 70,238 Various Various
59,389 $459,165
(b) Shoppes on the Parkway ("Shoppes")
On March 31, 1988, the Partnership purchased Shoppes, a shopping
center located in Hilton Head, South Carolina, for approximately
$7,360,000. The purchase was funded with approximately $2,394,000
cash paid at closing and an existing first mortgage loan from the
Crown Life Insurance Company (the "Lender") with a balance of
approximately $4,966,000. The loan bore interest at a rate of
10.25% per annum and matured on December 1, 1994. Prior to the
scheduled maturity of the first mortgage loan, the Lender granted
the Partnership an extension until April 1, 1995. On April 6,
1995, the Partnership obtained a first mortgage loan in the amount
of $6,100,000 (the "First Mortgage Loan") secured by Shoppes, from
Morgan Stanley Mortgage Capital, Inc. The First Mortgage Loan
bears interest at the rate of 9.55% per annum, amortizes over a
25-year period, requires monthly payments of principal and interest of
<PAGE>
approximately $53,500 and matures on April 6, 2002. A portion of
the proceeds of the First Mortgage Loan, approximately $4,675,000,
were used to retire the existing mortgage secured by Shoppes from
Crown Life Insurance Company. The remaining proceeds were used to
pay loan closing costs and a $999,919 return of capital
distribution to the Limited Partners.
Shoppes is a factory outlet retail center constructed in 1986
with approximately 86,900 rentable square feet situated on a 9.43
acre site. Shoppes was 97% occupied at December 31, 1995. To
retain tenants and to attract customers to the shopping center the
Partnership has begun improvements to the property. These
improvements included landscaping, benches, canopies, exterior
painting and refurbished restrooms.
The occupancy rate and average annual base rent per square foot
at December 31 for the last five years are as follows:
1995 1994 1993 1992 1991
Occupancy Rate 97% 100% 100% 99% 100%
Average Annual Base
Rent Per Square Foot $13.17 $12.60 $11.79 $11.75 $10.76
Shoppes has no tenants which individually occupy ten percent or
more of the rentable square footage. The following is a summary of
the tenant rent roll at December 31, 1995:
Annual Lease
Square Base Expiration Renewal
Tenant Feet Rent Date Options
All Tenants 84,506 $1,128,257 Various Various
Vacant 2,360 --
86,866 $1,128,257
(c) Ponderosa Restaurant ("Ponderosa")
On September 28, 1988, the Partnership purchased the land and
building occupied by a Ponderosa restaurant located in Garfield
Heights, Ohio. The building was constructed in 1981 and contains
5,400 square feet of space. The cost of the restaurant was
$1,075,000 plus closing costs which were paid in cash.
The restaurant was purchased from Ponderosa, Inc. ("Ponderosa"),
a wholly-owned subsidiary of Metromedia Company. The restaurant is
<PAGE>
operated by Ponderosa in accordance with the terms of a triple-net
lease whereby Ponderosa must pay all taxes, insurance premiums and
operating costs. The lease has a base term of 15 lease years (as
defined in the lease), terminates on September 22, 2003 and
contains four five-year renewal options. The Partnership is
landlord only and does not participate in the operations of the
restaurant.
Ponderosa is obligated to pay a minimum base rental amount every
four calendar weeks. In addition to the base rent, percentage rent
is paid based on the average gross sales of the first two lease
years (the "Percentage Base"). The percentage rent is 6.5% of the
amount by which the gross sales in any year exceeds this Percentage
Base.
Ponderosa has the right to repurchase this property at the end
of the tenth lease year (1998) and every five years thereafter at
the fair market value of the real estate at the time of repurchase.
The Ponderosa has been occupied since its purchase and the
average annual base rent per square foot at December 31 for the
last five years are as follows:
1995 1994 1993 1992 1991
Average Annual Base Rent
Per Square Foot $23.64 $23.64 $23.64 $23.64 $23.64
(d) The Annex of Schaumburg (the "Annex")
On December 31, 1986, the Partnership and Brauvin Real Estate
Fund L.P. 5 ("BREF 5") formed a joint venture (the "Joint Venture")
to purchase the Annex, a shopping center located in Schaumburg,
Illinois, for approximately $8,358,000. The Partnership had a 46%
interest in the Annex Joint Venture and BREF 5 had a 54% interest.
The purchase was funded with approximately $3,158,000 cash at
closing and $5,200,000 from the proceeds of an interim loan.
At the date of acquisition, the Annex was encumbered with an
existing first mortgage loan of approximately $4,356,600, which
bore interest at a rate of 13% per annum. The outstanding
principal balance was due on February 1, 1994. As this loan was
non-prepayable, the joint venture deposited approximately
$4,356,600 with Stewart Title Company (the "Title Company") and
<PAGE>
paid a fee of approximately $293,000 to the Title Company in 1986
to service this loan.
On January 31, 1994, the Annex Joint Venture entered into a
Reliance Agreement (the "Agreement") with the Title Company and
agreed to, on behalf of the Title Company, by the lender, John
Hancock Mutual Life Insurance Company: (i) make a $1,000,000
paydown on the loan;(ii) pay the Lender an administrative fee of
1.5% of the loan balance, after the $1,000,000 paydown; and (iii)
issue title insurance as required. As a condition to the Annex
Joint Venture's agreement with the Title Company, the Title Company
agreed to pay the Annex Joint Venture $5,000 per month commencing
February 1, 1994 through January 31, 1995 and $6,000 per month
thereafter. The Title Company also agreed to equally share with
the Annex Joint Venture the 2.5% interest savings after the 1.5%
administrative fee was paid, which the Annex Joint Venture was
expected to have been received upon maturity of the Agreement. In
February 1994, the Title Company paid the Lender the $1,000,000
paydown, as required in the Agreement. In 1995 and 1994, the Annex
received $5,000 and $55,000, respectively, from the Title Company,
which was recorded as a reduction of interest expense on the
property. The remaining amounts due from the Title Company were
offset against amounts owed to the Title Company. The Partnership
will not receive any additional payments under the Agreement.
The revised promissory note payable bore interest at a rate of
10% per annum, with monthly payments of principal and interest
based upon a 30-year amortization schedule of $45,630 commencing
December 1, 1989. The remaining principal balance of approximately
$5,023,000 matured on November 1, 1994. The note was
collateralized by a first mortgage lien on the Annex. Interest
paid approximated $17,700, $270,500 and $508,800 in 1995, 1994 and
1993, respectively.
The Annex Joint Venture did not make its monthly mortgage
payments that were due to AUSA Life Insurance Company, Inc.
("AUSA") on July 1, 1994, August 1, 1994, September 1, 1994 or
October 1, 1994. In addition, the Annex Joint Venture did not
repay the mortgage loan which matured November 1, 1994, at which
time the entire amount of principal and accrued interest became due
and payable. On August 11, 1994, the Annex Joint Venture received
a notice of default from AUSA demanding the payments due July 1,
1994 and August 1, 1994.
<PAGE>
On August 23, 1994, the Annex Joint Venture filed a voluntary
petition for bankruptcy (Chapter 11) in the United States
Bankruptcy Court in the Northern District of Illinois. On February
10, 1995, the Bankruptcy Court ordered the dismissal of the
voluntary petition for bankruptcy and AUSA filed a motion for
appointment of a receiver against the Annex Joint Venture. On
February 17, 1995, the motion was granted and an order was issued.
The receiver had full power and authority to operate, manage and
conserve the Annex pursuant to the order. On February 15, 1995,
the Annex Joint Venture received an amended notice of mortgage
foreclosure from AUSA. The Annex Joint Venture did not file an
answer to the amended foreclosure that was due March 17, 1995. On
April 3, 1995, a judgement of foreclosure and sale was entered into
against the Annex Joint Venture. A sheriff's sale of the Annex was
held on May 10, 1995 and on May 15, 1995 title was transferred to
AUSA, in satisfaction of the Partnership's obligation on the
promissory note payable.
In the opinion of the General Partners, the Partnership has
provided for adequate insurance coverage of its real estate
investment properties.
Risks of Ownership
The possibility exists that the tenants of the Partnership's
properties may be unable to fulfill their obligations pursuant to
the terms of the leases, including making base rent payments or
percentage rent payments to the Partnership. Such defaults by one
or more of the tenants could have an adverse effect on the
financial situation of the Partnership. Furthermore, the
Partnership may be unable to replace these tenants due to
competition in the market at the time any vacancy occurs.
Additionally, there are costs to the Partnership when replacing
tenants such as leasing commissions and tenant improvements. Such
improvements may require expenditure of Partnership funds otherwise
available for distribution.
<PAGE>
Item 3. Legal Proceedings.
On August 23, 1994, the Annex Joint Venture filed a voluntary
petition for bankruptcy (Chapter 11) in the United States
Bankruptcy Court in the Northern District of Illinois. On February
10, 1995, the Bankruptcy Court ordered the dismissal of the
voluntary petition for bankruptcy and AUSA filed a motion for
appointment of a receiver against the Joint Venture. On February
17, 1995, the motion was granted and an order was issued. The
receiver had full power and authority to operate, manage and
conserve the Annex pursuant to the order. On February 15, 1995,
the Joint Venture received an amended notice of mortgage
foreclosure from AUSA. The Joint Venture did not file an answer to
the amended foreclosure that was due on March 17, 1995. On April
3, 1995, a judgement of foreclosure and sale was entered into
against the Joint Venture. A sheriff's sale of the Annex was held
on May 10, 1995 and on May 15, 1995 title was transferred to AUSA,
in satisfaction of the Partnership's obligation on the
Partnership's obligation on the promissory note payable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
PART II
Item 5. Market for the Registrant's Limited Partnership Interests
and Related Security Holder Matters.
At December 31, 1995, there were 612 Limited Partners in the
Partnership. There is currently no established public trading
market for Units and it is not anticipated that a public market for
Units will develop. Bid prices quoted by "partnership exchanges"
vary widely and are not considered a reliable indication of market
value. Neither the Partnership nor Brauvin 6, Inc. (the "Corporate
General Partner") will redeem or repurchase outstanding Units.
Pursuant to the terms of the Agreement, there are restrictions
on the ability of the Limited Partners to transfer their Units. In
all cases, the General Partners must consent to any substitution of
a Limited Partner.
Cash distributions from operations to Limited Partners for 1995,
1994 and 1993 were $245,921, $236,835 and $370,119 respectively.
As a result of the refinancing of the Shoppes mortgage, a
distribution of $999,919 representing a return of capital was made
to the Limited Partners on August 15, 1995.
<PAGE>
Item 6. Selected Financial Data.
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1995 1994 1993
Selected Income
Statement Data:
Total Income $2,322,670 $2,220,297 $2,038,853
Interest Expense 924,883 765,221 776,984
Net Income (Loss) 285,142 (106,974) (514,916)
Net Income (Loss) Per
Limited Partnership
Unit 36.00 (13.50) (65.00)
Selected Balance
Sheet Data:
Investment in
(Liability to)
Joint Venture $ -- $ (231,115) $ 252,941
Total Assets 12,173,054 11,668,741 12,181,565
Mortgages Payable 8,962,634 7,658,921 7,781,639
Cash Distributions to
Limited Partners 245,921 236,835 370,119
Cash Distributions to
Limited Partners
Per Unit 31.36 30.20 47.19
Return of Capital to
Limited Partners 999,919 -- --
Return of Capital to
Limited Partners
Per Unit 127.5 -- --
<PAGE>
Item 6. Selected Financial Data - Continued.
Year Ended Year Ended
December 31, December 31,
1992 1991
Selected Income Statement Data:
Total Income $2,029,364 $1,970,720
Interest Expense 786,919 795,913
Net Income 253,077 195,778
Net Income Per Limited
Partnership Unit 31.95 24.71
Selected Balance Sheet Data:
Investment in Joint Venture 1,093,204 1,173,867
Total Assets 13,171,462 13,525,156
Mortgages Payable 7,892,985 7,994,016
Cash Distributions to
Limited Partners 520,213 563,685
Cash Distributions to Limited
Partners Per Unit 66.33 71.88
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
The Partnership intends to satisfy its short-term liquidity needs
through cash reserves and cash flow from the properties. Long-term
needs are expected to be satisfied through modification of the
mortgages at more favorable interest rates.
On May 15, 1995, title to the Annex, the sole property held by
the Partnership and Brauvin Real Estate Fund L.P. 5 ("BREF 5") (the
"Joint Venture") was transferred to AUSA Life Insurance Company,
Inc. ("AUSA") through a sheriff's sale. The Joint Venture ceased
operations on May 15, 1995, paid final administrative expenses, and
had no other available cash to provide final distributions. The
Joint Venture partnership agreement provides for the dissolution of
the Joint Venture upon mutual agreement of the Partnership and BREF
5. Accordingly, the Partnership and BREF 5 have agreed to dissolve
and will formally terminate the Joint Venture in 1996.
As a result of reversion of the property to the AUSA, the Joint
Venture recorded a $2,702,083 provision for investment property
impairment to reduce the Annex property to its estimated fair
value. In accordance with Statement No. 121 no depreciation
expense was recorded during 1995. In addition, the Partnership
recorded an extraordinary gain on the extinguishment of debt in the
amount of $3,177,788, including the net reversals of approximately
$632,000 of accrued expenses.
The Partnership was required to make a balloon mortgage payment
for Shoppes in April 1995 in the amount of $4,671,392. On April 6,
1995, the Partnership obtained a first mortgage loan in the amount
of $6,100,000 ( the "First Mortgage Loan") secured by Shoppes,
located in Hilton Head, South Carolina, from Morgan Stanley
Mortgage Capital, Inc. The First Mortgage Loan bears interest at
the rate of 9.55% per annum, amortizes over a 25-year period,
requires monthly payments of principal and interest of
approximately $53,000 and matures on April 6, 2002. A portion of
the proceeds of the First Mortgage Loan, approximately $4,675,000,
were used to retire an existing mortgage secured by Shoppes from
Crown Life Insurance Company. The remaining proceeds were used to
pay loan closing costs and a $999,919 return of capital
distribution to the Limited Partners.
<PAGE>
The Partnership has paid annual cash distributions to Limited
Partners since 1986, as many (i.e., three of four) of the
Partnership's properties have been operating in strong retail
markets. Rental rates at Shoppes have increased as new leases have
been signed and existing leases renewed. However, operating cash
flow of the Partnership has decreased in 1995 compared to 1994,
primarily due to the increase of expenses pertaining to the
foreclosure of the Annex.
Below is a table summarizing the historical data for distribution
rates per annum for the last five years:
Distribution
Date 1995 1994 1993 1992 1991
February 15 2.00% 3.75% 5.00% 7.25% 7.25%
May 15 5.00 3.75 4.00 6.00 7.25
August 15 (a) -- 4.50 6.00 7.25
November 15 6.00 2.00 4.50 5.00 7.25
(a) The August 15, 1995 distribution was a return of capital
distribution of $999,919.
The trend of decreasing distributions was primarily attributed to
the poor performance of the Annex which was foreclosed upon on May
15, 1995. Subsequent to the Annex foreclosure distributions rates
have increased.
A distribution of Operating Cash Flow for the fourth quarter of
1995 was made to the Limited Partners on February 15, 1996 in the
amount of $99,171. The Preferential Distribution Deficiency
equaled $3,490,805 after this last distribution, a $539,026
increase over 1994.
The General Partners expect to distribute proceeds from operating
cash flow, if any, and from the sale of real estate to Limited
Partners in a manner that is consistent with the investment
objectives of the Partnership. Management of the Partnership
believes that cash needs may arise from time to time which will
have the effect of reducing distributions to Limited Partners to
amounts less than would be available from refinancings or sale
proceeds. These cash needs include, among other things,
maintenance of working capital reserves in compliance with the
<PAGE>
Partnership Agreement as well as payments for major repairs,
tenant improvements and leasing commissions in support of real
estate operations.
Results of Operations
The Partnership's revenue and expenses are affected primarily by
the operations of the properties. Property operations, and in
particular the components of income, demand for space and rental
rates are, to a large extent, determined by local and national
market conditions.
The General Partners conduct an in-depth assessment of each
property's physical condition as well as a demographic analysis to
assess opportunities for increasing occupancy and rental rates and
decreasing operating costs. In all instances, decisions concerning
restructuring of loan terms, reversions and subsequent operation of
the property are made with the intent of maximizing the potential
proceeds to the Partnership and, therefore, return of investment
and income to Limited Partners.
In certain instances and under limited circumstances, management
of the Partnership entered into negotiations with lenders for the
purpose of restructuring the terms of loans to provide for debt
service levels that could be supported by operations of the
properties. In such instances, the terms of the restructuring
agreement generally provide the lender with the potential for
recovering forgone economic benefits at the time the property is
sold or refinanced. When negotiations are unsuccessful, management
of the Partnership considers the possibility of reverting the
properties to the first mortgage lender. Foreclosure proceedings
may require 6 to 24 months to conclude.
An affiliate of the Partnership and the General Partners is
assigned responsibility for day-to-day management of the
properties. The affiliate receives a combined management and
leasing fee ("Management" fee) which cannot exceed 6% of gross
revenues generated by the properties. Management fee rates are
determined by the extent of services provided by the affiliate
versus services that may be provided by third parties, i.e.,
independent leasing agents. In all instances, fees paid by the
Partnership to the property management affiliate are, in the
General Partners' opinion, comparable to fees that would be paid to
independent third parties.
<PAGE>
Results of Operations - 1995 Compared to 1994
(Amounts Rounded in 000's)
The Partnership generated net income of $285,000 in 1995,
compared to a net loss of $107,000 in 1994, an increase of
$392,000. The $392,000 increase in net income resulted primarily
from the recognition of the Partnership's share of the gain on the
extinguishment of debt of $3,178,000 at the Annex netted against
the provision for the Annex's investment property impairment of
$2,702,000. The Partnership's share of the Annex's gain on the
extinguishment of debt and investment property impairment was
$1,462,000 and $1,243,000, respectively.
Total income was $2,323,000 in 1995 compared to $2,220,000 in
1994, an increase of $103,000. Rental and other income (primarily
tenant reimbursements) increased $19,000 and $40,000, respectively.
The increase in rental income was primarily due to the Shoppes'
increase in average annual base rents charged to tenants. The
increase in other income is also primarily associated with the
Shoppes, since the Partnership charges the tenants for certain
expenses incurred (i.e., repairs and maintenance and operating) in
the normal operations at the property. Interest income increased
$44,000 in 1995 as compared to 1994 as a result of investing excess
cash in Euro Currency investments.
Total expenses incurred in 1995 were $2,269,000 compared to
$1,843,000 in the prior year, an increase of $426,000. The
increase was primarily caused by an increase in general and
administrative expense of $196,000 and an increase of $160,000 in
mortgage and other interest. The increase in general and
administrative is due to the write-off of the $165,000 receivable
due from the Annex. The $160,000 increase in interest expense is
primarily due to (1) the recognition of $75,000 of default interest on the
Shoppes from December 1, 1994 to April 6, 1995, which was paid on
the date the refinancing of the Shoppes was completed and (2) the
$102,000 interest expense computed on the additional $1,425,000
mortgage payable balance on the Shoppes refinanced mortgage. The
$52,000 increase in repairs and maintenance is mainly due to the
$40,000 increase at the Shoppes. The improvements at the Shoppes
were made to enhance the outside appearance which include
landscaping, benches, canopies, exterior painting and refurbished
restrooms. The Partnership made these improvements in an effort to
retain tenants and to attract customers to the shopping center.
<PAGE>
In 1995 and 1994, the Annex recorded a loss for the provision for
investment property impairment in the amount of $2,702,000 and
$883,000, respectively, an increase of $1,819,000. The loss is
reflected as a component of equity interest in joint venture net
income (loss) in the statements of operations. The Partnership's
share of these provisions were $1,243,000 and $406,000 in 1995 and
1994, respectively.
A summary of the changes in income and expense items for the year
ended December 31, 1995 as compared to the year ended December 31,
1994 is detailed in the following schedule.
<PAGE>
YEAR ENDED DECEMBER 31, 1995
AS COMPARED TO
YEAR ENDED DECEMBER 31, 1994
Increase
(Decrease) Increase
Increase in Costs (Decrease)
(Decrease) and in Net
in Income Expenses Income
[000's Omitted]
Income:
Rental $ 19 $ -- $ 19
Interest 44 -- 44
Other, primarily expense
Reimbursements 40 -- 40
Total Income 103 -- 103
Expenses:
Mortgages and other interest -- 160 (160)
Depreciation and amortization -- (17) 17
Real estate taxes -- 3 (3)
Repairs and maintenance -- 52 (52)
Operating -- 32 (32)
General and administrative -- 196 (196)
Total Expenses -- 426 (426)
Net Loss before equity
interest in Joint Venture 103 426 (323)
Equity interest in Joint
Venture's net income 715 -- 715
Net Income $818 $426 $392
<PAGE>
Results of Operations - 1994 Compared to 1993
(Amounts Rounded in 000's)
The Partnership generated a net loss of $107,000 in 1994,
compared to a net loss of $515,000 in 1993. The $408,000 decrease
in net loss resulted primarily from an increase in total income of
$181,000 and a decrease in the recognition of the provisions for
the Annex's investment property impairment of $617,000 (the
Partnership's share of the decrease is $284,000).
Total income was $2,220,000 in 1994 compared to $2,039,000 in
1993, an increase of $181,000. Rental and other income (primarily
tenant reimbursements) increased $85,000 and $91,000, respectively.
The increase in rental income was primarily due to the Shoppes'
increase in average annual base rents charged to tenants. The
increase in other income is also primarily associated with the
Shoppes, since the Partnership charges the tenants for certain
expenses incurred (i.e., repairs and maintenance and operating) in
the normal operations at the property.
Total expenses incurred in 1994 were $1,843,000 compared to
$1,760,000 in the prior year, an increase of $83,000. The increase
was primarily caused by increases in operating expense of $38,000
and repairs and maintenance expense of $26,000. These expenses
increased in an effort to retain and attract new tenants to the
Partnership's properties.
In 1994 and 1993, the Annex recorded a loss for the provision for
investment property impairment in the amount of $883,000 and
$1,500,000, respectively, a decrease of $617,000. The loss is
reflected as a component of equity interest in joint venture net
loss in the statements of operations. The Partnership's share of
these provisions were $406,000 and $690,000 in 1994 and 1993,
respectively. In addition to the decrease in the provision for
investment property impairment there was a decrease in mortgage and
other interest that resulted from the discontinuation of accruing
interest as of the default date, July 1, 1994. These decreases in
expense were offset by a decrease in rental income as a result of
the decrease in occupancy of 64% at December 31, 1993 to 56% at
December 31, 1994.
A summary of the changes in income and expense items for the year
ended December 31, 1994 as compared to the year ended December 31,
1993 is detailed in the following schedule.
<PAGE>
YEAR ENDED DECEMBER 31, 1994
AS COMPARED TO
YEAR ENDED DECEMBER 31, 1993
Increase
(Decrease) Increase
Increase in Costs (Decrease)
(Decrease) and in Net
in Income Expenses Loss
[000's Omitted]
Income:
Rental $ 85 $ -- $ 85
Interest 5 -- 5
Other, primarily expense
Reimbursements 91 -- 91
Total Income 181 -- 181
Expenses:
Mortgages and other interest -- (12) 12
Depreciation -- 19 (19)
Real estate taxes -- 3 3
Repairs and maintenance -- 26 (26)
Operating -- 38 (38)
General and administrative -- 9 (9)
Total Expenses -- 83 (83)
Net Income before equity
interest in Joint Venture 181 83 98
Equity interest in Joint
Venture's net loss 310 -- 310
Net Loss $491 $ 83 $408
<PAGE>
Item 8.Financial Statements and Supplementary Data.
See Index to Financial Statements and Schedule on Page F-1 and
S-1 of this Form 10-K for financial statements and financial
statement schedule, where applicable.
The financial information required in Item 302 of Regulation S-K
is not applicable.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
There have been no changes in accountants or reported
disagreement on any matter of accounting principles, practices or
financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Partnership.
The General Partners of the Partnership are:
Brauvin 6, Inc., an Illinois corporation
Mr. Jerome J. Brault, individually
Mr. Cezar M. Froelich, individually
Brauvin 6, Inc. was formed under the laws of the State of
Illinois in 1986, with its issued and outstanding shares being
owned by A.G.E. Realty Corporation, Inc. (50%), and Messrs. Jerome
J. Brault (beneficially) (25%) and Cezar M. Froelich (25%).
The principal officers and directors of the Corporate General
Partner are:
Mr. Jerome J. Brault . . . . . . . . . . . . .Chairman of the Board of
Directors, Director and President
Mr. James L. Brault. . . . . . . . . . . .Vice President and Secretary
Mr. Robert J. Herleth. . . . . . . . . . . Vice President and Director
Mr. David W. Mesker. . . . . . . . . . . . . . . . . . . . . .Director
Mr. Thomas J. Coorsh . . . . . . . . . . . . . . . Treasurer and Chief
Financial Officer
The business experience during the past five years of the General
Partners, officers and directors is as follows:
Mr. Jerome J. Brault (age 62) is Director, Chairman of the Board
and President of Brauvin Properties, Inc., Brauvin Realty
Properties, Inc., Brauvin Realty Partners, Inc., Brauvin Ventures,
Inc., Brauvin Associates, Inc., Brauvin 6, Inc., Brauvin Advisory
Services, Inc., Brauvin Securities Inc. and Brauvin Restaurant
Properties, Inc. He is Director, President, Chairman of the Board,
Chief Executive Officer and Secretary of Brauvin Management Company
and Brauvin Financial, Inc. He is President and Director of
Brauvin, Inc. He is also Director, President, Chairman of the
Board and Chief Executive Officer of Brauvin Chili's Inc., Brauvin
Realty Services, Inc., Brauvin Realty Advisors, Inc., Brauvin
Realty Advisors II, Inc., Brauvin Realty Advisors III, Inc.,
Brauvin Realty Advisors IV, Inc., Brauvin Net Lease V, Inc., and
<PAGE>
Brauvin Realty Advisors V, L.L.C., as well as an individual
general partner in seven other affiliated public limited
partnerships. Prior to Mr. Brault's affiliation with the Brauvin
organization, he was the Chief Operating Officer of Burton J.
Vincent, Chesley & Company, a New York Stock Exchange member firm.
He is the father of James L. Brault, officer of certain affiliated
Brauvin entities.
Mr. Cezar M. Froelich (age 50) is a principal with the Chicago
law firm of Shefsky Froelich & Devine Ltd., which acts as counsel
to the General Partners, the Partnership and certain of their
affiliates. His practice has been primarily in the fields of
securities and real estate and he has acted as legal counsel to
various public and private real estate limited partnerships,
mortgage pools and real estate investment trusts. Mr. Froelich is
an individual general partner in seven other affiliated public
limited partnerships and a shareholder in Brauvin Management
Company and Brauvin Financial Inc. Mr. Froelich resigned as a
director of the corporate general partner in December 1994.
Mr. James L. Brault (age 35) is a Vice President and Secretary
of Brauvin Chili's, Inc., Brauvin Properties, Inc., Brauvin Realty
Properties, Inc., Brauvin Realty Partners, Inc., Brauvin Ventures,
Inc., Brauvin 6, Inc., Brauvin Realty Advisors, Inc., Brauvin
Realty Advisors II, Inc., Brauvin Realty Advisors III, Inc.,
Brauvin Associates Inc., Brauvin Inc., Brauvin Securities, Inc. and
Brauvin Restaurant Properties, Inc. He is Executive Vice President
and Secretary of Brauvin Advisory Services, Inc. He is also
Executive Vice President, Secretary and Director of Brauvin Realty
Advisors IV, Inc., Brauvin Net Lease V, Inc., and Brauvin Realty
Advisors V, L.L.C. Additionally, he is the Executive Vice
President and Assistant Secretary of Brauvin Management Company and
Brauvin Financial, Inc., as well as a Director of Brauvin
Financial, Inc. Prior to joining the Brauvin organization in May
1989, he was a Vice President of the Commercial Loan Division of
the First National Bank of Chicago, based in their Washington, D.C.
office. Mr. Brault joined the First National Bank of Chicago in
1983 and his responsibilities included the origination and
management of commercial real estate loans, as well as the direct
management of a loan portfolio in excess of $150,000,000. Mr.
Brault is a son of Mr. Jerome J. Brault, the managing general
partner of the Partnership.
Mr. Robert J. Herleth (age 43) is a Vice President and Director
of Brauvin Properties, Inc., Brauvin Realty Properties, Inc.,
<PAGE>
Brauvin Realty Partners, Inc., Brauvin Ventures, Inc., and Brauvin
6, Inc. He joined A.G. Edwards & Sons, Inc. in 1980 and presently
serves as a Vice President of A.G.E. Realty Corp. Mr. Herleth is
also a director and officer of Gull-AGE Capital Group and its
subsidiaries.
Mr. David W. Mesker (age 64) is a Director of Brauvin Properties,
Inc., Brauvin Realty Properties, Inc., Brauvin Realty Partners,
Inc., Brauvin Ventures, Inc. and Brauvin 6, Inc. Mr. Mesker is
presently a Senior Vice President of A.G. Edwards & Sons, Inc. and
a Director and officer of Gull-AGE Capital Group and its
subsidiaries.
Mr. Thomas J. Coorsh (age 46) is the Treasurer and Chief
Financial Officer of Brauvin Chili's, Inc., Brauvin Properties,
Inc., Brauvin Realty Properties, Inc., Brauvin Realty Partners,
Inc., Brauvin Ventures, Inc., Brauvin 6, Inc., Brauvin Realty
Advisors, Inc., Brauvin Realty Advisors II, Inc., Brauvin Realty
Advisors III, Inc., Brauvin Realty Advisors IV, Inc., Brauvin Net
Lease V, Inc., Brauvin Realty Advisors V, L.L.C., Brauvin
Management Company, Brauvin Financial, Inc., Brauvin Securities,
Inc., Brauvin Inc., Brauvin Associates, Inc., Brauvin Advisory
Services, Inc. and Brauvin Restaurant Properties, Inc. He is
responsible for the overall financial management of Brauvin
Management Company, Brauvin Financial, Inc. and related
partnerships. He is responsible for partnership accounting and
financial reporting to regulatory agencies. From May 1992 until
joining Brauvin in November of 1993, Mr. Coorsh was self-employed
as a business consultant. Between 1990 and 1992, Mr. Coorsh was
the senior vice president of finance and chief accounting officer
for Lexington Homes, a large, Illinois home builder. In 1990 Mr.
Coorsh left The Balcor Company, a major real estate syndicator,
property manager and lender to join Lexington Homes. Mr. Coorsh
began work at The Balcor Company in 1985 and his most recent
position was first vice president - finance. Mr. Coorsh's
responsibilities at Balcor included property management accounting
and finance; treasury; and financial and strategic planning.
Before joining Balcor, Mr. Coorsh held financial positions with
several large, public corporations headquartered in the Chicago
metropolitan area. Mr. Coorsh is a Certified Public Accountant.
<PAGE>
Item 11 Executive Compensation.
(a & b) The Partnership is required to pay certain fees, make
distributions and allocate a share of the profits and losses of the
Partnership to the Corporate General Partner or other affiliates as
described under the caption "Compensation Table" on pages 10 to 12
of the Partnership's Prospectus, as supplemented, and the sections
of the Partnership Agreement entitled "Distribution of Operating
Cash Flow," "Allocation of Profits, Losses and Deductions,"
"Distribution of Net Sale or Refinancing Proceeds" and
"Compensation of General Partners and Their Affiliates" on pages
A-10 to A-15 of the Agreement, attached as Exhibit A to the
Prospectus. The relationship of the Corporate General Partner (and
its directors and officers) to its affiliates is set forth in Item
10. Reference is also made to Note 3 of the Notes to Financial
Statements filed with this annual report for a description of such
distributions and allocations.
The General Partners received a 1% share of Partnership net
income or losses for the years 1990 through 1995.
An affiliate of the General Partners of the Partnership is
reimbursed for its direct expenses relating to the administration
of the Partnership.
The Partnership does not have any employees and therefore there
is no compensation paid.
(c, d, e & f) Not applicable.
(g) The Partnership has no employees and pays
no employee or director compensation.
(h & i) Not applicable.
(j) Compensation Committee Interlocks and
Insider Participation. Since the
Partnership had no employees, it did not
have a compensation committee and is not
responsible for the payment of any
compensation.
(k) Not applicable.
(l) Not applicable.
<PAGE>
Item 12. Security Ownership of Certain Beneficial
Owners and Management.
(a) No person or group is known by the Partnership to own
beneficially more than 5% of the outstanding Units of the
Partnership.
(b) The officers and directors of the Corporate General
Partner of the Partnership do not, individually or as a group, own
any Units.
(c) The Partnership is not aware of any arrangements, the
operations of which may result in a change of control of the
Partnership.
No officer or director of the Corporate General Partner possesses
a right to acquire beneficial ownership of Units. The General
Partners will share in the profits, losses and distributions of the
Partnership as outlined in Item 11, "Executive Compensation."
Item 13. Certain Relationships and Related Transactions.
(a & b) The Partnership is entitled to engage in various
transactions involving affiliates of the Corporate General Partner
of the Partnership, as described in the sections of the
Partnership's Prospectus, as supplemented, entitled "Compensation
Table" and "Conflicts of Interest" at pages 10 to 15 and the
section of the Agreement entitled "Rights, Duties and Obligations
of General Partners" at pages A-17 to A-20 of the Agreement. The
relationship of the Corporate General Partner to its affiliates is
set forth in Item 10. Cezar M. Froelich is an individual general
partner of the Partnership and is also a principal of the law firm
of Shefsky Froelich & Devine Ltd., which acts as securities and
real estate counsel to the Partnership. Reference is made to Note
5 of the Notes to Financial Statements filed with this annual
report for a summary of transactions with affiliates.
As a precondition to the new financing on the Shoppes on the
Parkway, the lender required that ownership of the property reside
in a special purpose entity ("SPE"). To accommodate the lender's
requirements, ownership of the property was transferred to the SPE,
Brauvin/Shoppes on the Parkway L.P. which is owned 99% by the
Partnership and 1% by an affiliate of the General Partners.
Distributions of Brauvin/Shoppes on the Parkway L.P. are
<PAGE>
subordinated to the Partnership which effectively precludes any
distributions from the SPE to affiliates of the General Partners.
The creation of Brauvin/Shoppes on the Parkway L.P. did not affect
the Partnership's economic ownership of the Shoppes property.
Furthermore, this change in ownership structure had no material
effect on the financial statements of the Partnership.
The General Partners of the Partnership and Brauvin Real Estate
Fund L.P. 5, the General Partners of Brauvin/The Annex of
Schaumburg Associates ("The Annex"), determined that it was in the
best interest of the Partnership for the Annex to file for
reorganization under Chapter 11 of the bankruptcy code. The intent
of the bankruptcy filing was to seek financial reorganization and
protect the Partnership's interest in the Annex. Because the Annex
did not have the cash necessary to meet the expense of pursuing the
bankruptcy, the Partnership loaned the necessary funds to do so.
Future net cash flow generated by the Annex, if any, were intended
to be used to repay the loan balance prior to any distributions.
When ownership of the Annex was lost through foreclosure on May 15,
1995, the Partnership recorded a loss on the loan and the balance
was written off.
(c) No management persons are indebted to the Partnership.
(d) There have been no transactions with promoters.
<PAGE>
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules, and
Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(1) (2) Financial Statements and Schedule.(See Index to
Financial Statements and Schedule filed with this annual report).
(3) Exhibits required by the Securities and Exchange
Commission Regulation S-K Item 601:
Exhibit No. Description
*3.(a) Limited Partnership Agreement
*3.(b) Articles of Incorporation of Brauvin 6, Inc.
*3.(c) By-Laws of Brauvin 6, Inc.
*3.(d) Certificate of Limited Partnership of
the Partnership
*10.(a) Escrow Agreement
*10.(b)(1) Management Agreement
27. Financial Data Schedule
*28 Pages 9-14 and A-15 to A-18 of the
Partnership's Prospectus and the Agreement
dated May 30, 1986, as supplemented.
* Incorporated by reference from the exhibits filed with the
Partnership's registration statement (File No. 0-16857) on Form
S-11 filed under the Securities Act of 1933:
(b) The Partnership did not file any report on Form 8-K during
the fourth quarter of 1995.
(c) An annual report for the fiscal year 1995 will be sent to
the Limited Partners subsequent to this filing and the Partnership
will furnish such reports to the Securities and Exchange Commission
when it is sent at that time.
(d) See Financial Statements for Brauvin/The Annex of Schaumburg
Associates on Page S-1.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BRAUVIN INCOME PROPERTIES L.P. 6
BY: Brauvin 6, Inc.
Corporate General Partner
By: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors and President
By: /s/ James L. Brault
James L. Brault
Vice President and Secretary
By: /s/ Robert J. Herleth
Robert J. Herleth
Vice President and Director
By: /s/ David W. Mesker
David W. Mesker
Director
By: /s/ Thomas J. Coorsh
Thomas J. Coorsh
Chief Financial Officer and
Treasurer
INDIVIDUAL GENERAL PARTNERS
/s/ Jerome J. Brault
Jerome J. Brault
/s/ Cezar M. Froelich
Cezar M. Froelich
Dated: March 29, 1996
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Page
Report of Independent Auditors. . . . . . . . . . . . . . F-2
Balance Sheets, December 31, 1995 and 1994. . . . . . . . F-3
Statements of Operations, for the years ended
December 31, 1995, 1994 and 1993. . . . . . . . . . . . . F-4
Statements of Partners' Capital, for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . F-5
Statements of Cash Flows, for the years ended
December 31, 1995, 1994 and 1993. . . . . . . . . . . . . F-6
Notes to Financial Statements . . . . . . . . . . . . . . F-7
Schedule III -- Real Estate and Accumulated
Depreciation, December 31, 1995 . . . . . . . . . . . . . F-18
All other schedules provided for in Item 14(a)(2) of Form 10-K are
either not required, or are inapplicable, and therefore have been
omitted or equivalent information has been included herein.
EXHIBIT
The financial statements for Brauvin/The Annex of Schaumburg
Associates are filed separately with this annual report. (See Index
to Financial Statements on page S-1).
<PAGE>
Report of Independent Auditors
To the Partners of
Brauvin Income Properties L.P. 6
We have audited the accompanying balance sheets of Brauvin Income
Properties L.P. 6 as of December 31, 1995 and 1994, and the related
statements of operations, partners' capital, and cash flows for
each of the three years in the period ended December 31, 1995. 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 financial statements referred to above present
fairly, in all material respects, the financial position of Brauvin
Income Properties L.P. 6 at December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995, in conformity with
general accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation
to the basic financial statements taken as whole, presents fairly
in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
March 8, 1996
<PAGE>
BALANCE SHEETS
December 31, December 31,
1995 1994
ASSETS
Cash and cash equivalents $ 561,479 $ 445,771
Escrow and other deposits 421,096 74,840
Due from affiliates 730 29,171
Tenant receivables (net of
allowances of $8,300 in 1995
and $6,500 in 1994) 306,837 269,955
Other assets 207,106 71,536
Investment in (liability to)
joint venture -- (231,115)
1,497,248 660,158
Investment in real estate, at cost:
Land 2,756,651 2,756,651
Buildings 10,623,508 10,596,134
13,380,159 13,352,785
Less: accumulated depreciation (2,704,353) (2,344,202)
Total investment in real
estate, net 10,675,806 11,008,583
Total Assets $12,173,054 $11,668,741
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued
expenses $ 271,106 $ 108,644
Security deposits 5,583 6,747
Mortgages payable 8,962,634 7,658,921
Total Liabilities 9,239,323 7,774,312
Partners' Capital
General Partners 7,349 4,498
Limited Partners (7,842.5
limited partnership units
issued and outstanding) 2,926,382 3,889,931
Total Partners' Capital 2,933,731 3,894,429
Total Liabilities and
Partners' Capital $12,173,054 $11,668,741
See notes to financial statements
<PAGE>
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
INCOME
Rental $1,836,363 $1,817,802 $1,733,081
Interest 54,355 9,878 4,131
Other, primarily
expense reimbursements 431,952 392,617 301,641
Total Income 2,322,670 2,220,297 2,038,853
EXPENSES
Mortgages and other
interest 924,883 765,221 776,984
Depreciation and
amortization 370,382 387,589 368,389
Real estate taxes 131,975 129,366 126,010
Repairs and maintenance 100,218 48,001 22,126
Operating 298,137 266,438 228,199
General and administrative 443,048 246,600 237,798
Total Expenses 2,268,643 1,843,215 1,759,506
Equity interest in
Joint Venture's
net income (loss) 231,115 (484,056) (794,263)
Net Income (Loss) $ 285,142 $ (106,974) $ (514,916)
Net Income (Loss)
allocated to the
General Partners $ 2,851 $ (1,070) $ (5,149)
Net Income (Loss)
allocated to the
Limited Partners $ 282,291 $ (105,904) $ (509,767)
Net Income (Loss) per
limited partnership
interest (7,842.5 units) $ 36.00 $ (13.50) $ (65.00)
See notes to financial statements
<PAGE>
STATEMENTS OF PARTNERS' CAPITAL
For the Years Ended December 31, 1995, 1994 and 1993
General Limited
Partners Partners Total
BALANCE at January 1, 1993 $ 10,717 $5,112,556 $5,123,273
Net loss (5,149) (509,767) (514,916)
Cash distributions -- (370,119) (370,119)
BALANCE at December 31, 1993 5,568 4,232,670 4,238,238
Net loss (1,070) (105,904) (106,974)
Cash distributions -- (236,835) (236,835)
BALANCE at December 31, 1994 4,498 3,889,931 3,894,429
Return of capital -- (999,919) (999,919)
Net income 2,851 282,291 285,142
Cash distributions -- (245,921) (245,921)
BALANCE at December 31, 1995 $ 7,349 $2,926,382 $2,933,731
Cash distribution per limited
partnership interest outstanding:
1995: $ -- $ 31.36 $31.36
1994: -- 30.20 30.20
1993: -- 47.19 47.19
Return of capital per limited
partnership interest outstanding: $ -- $127.50 $127.50
See notes to financial statements
<PAGE>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Cash Flow From Operating Activities:
Net income (loss) $ 285,142 $(106,974) $(514,916)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 370,382 387,589 368,389
Equity interest in Joint Venture's
net (income)loss (231,115) 484,056 794,263
Loss on loan to affiliate 164,380 -- --
Change in assets and liabilities:
(Increase) decrease in due
from affiliates (135,939) 6,827 (32,948)
(Increase) decrease in escrow
and other deposits (346,256) (46,566) 1,660
Increase in tenant receivables (36,882) (15,351) (53,605)
Decrease (increase) in other
assets 12,152 (34,950) (27,795)
Increase (decrease) in accounts
payable and accrued expenses 162,462 (47,410) 6,484
(Decrease) increase in security
deposits (1,164) 1,113 --
Net cash provided by operating
activities 243,162 628,334 541,532
Cash Flow From Investing Activities:
Capital expenditures (27,374) -- (81,360)
Cash distribution from
Joint Venture -- -- 46,000
Net cash used in investing
activities (27,374) -- (35,360)
Cash Flow From Financing Activities:
Repayment of mortgages payable (4,796,287) (122,718) (111,346)
Proceeds from refinancing 6,100,000 -- --
Loan fees (157,953) -- --
Return of capital (999,919) -- --
Cash distributions to Limited
Partners (245,921) (236,835) (370,119)
Cash used in investing activities (100,080) (359,553) (481,465)
Net increase in cash and cash
equivalents 115,708 268,781 24,707
Cash and cash equivalents at
beginning of year 445,771 176,990 152,283
Cash and cash equivalents at end
of year $ 561,479 $ 445,771 $ 176,990
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(1) ORGANIZATION
Brauvin Income Properties L.P. 6 (the "Partnership") is a
Delaware limited partnership organized for the purpose of
acquiring, operating, holding for investment and disposing of
commercial properties consisting principally of existing shopping
centers and, to a lesser extent, office and industrial buildings.
The General Partners of the Partnership are Brauvin 6, Inc., Jerome
J. Brault and Cezar M. Froelich. Brauvin 6, Inc. is owned by the
A.G.E. Realty Corporation (50%) and by Messrs. Brault
(beneficially) (25%) and Froelich (25%). A.G. Edwards & Sons, Inc.
and Brauvin Securities, Inc., affiliates of the General Partners,
were the selling agents of the Partnership. The Partnership is
managed by an affiliate of the General Partners.
The Partnership was formed in April 1986. The Partnership filed
a Registration Statement on Form S-11 with the Securities and
Exchange Commission which became effective on May 30, 1986. The
offering was terminated on August 31, 1987 having sold $7,842,500
in limited partnership interests.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The accompanying financial statements have been prepared using
the accrual method of accounting.
Income Taxes
A partnership is not subject to the payment of Federal or State
income taxes because components of its income and expenses flow
through directly to the partners. For tax purposes, the net
carrying value of the real estate for the Partnership is
$4,327,648.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
<PAGE>
the financial statements and the accompanying notes.
Actual results could differ from those estimated.
Joint Venture Partnership
The Partnership owned a 46% interest in the Annex, a shopping
center located in Schaumburg, Illinois. The investment has been
recorded using the equity method.
On May 15, 1995, title to the Annex the sole property owned by
the Partnership and Brauvin Real Estate Fund L.P. 5 ("BREF 5") was
transferred to AUSA Life Insurance Company , Inc. through a
sheriff's sale. As a result of reversion of the property to the
lender, the Annex Joint Venture recorded a $2,702,083 provision for
investment property impairment to reduce the Annex property to its
estimated fair value. In addition, the Partnership recorded an
extraordinary gain on the extinguishment of debt in the amount of
$3,177,788, including the net reversals of approximately $632,000
of accrued expenses. The Partnership's share of the Annex's gain
on the extinguishment of debt and investment property impairment
was $1,462,000 and $1,243,000, respectively.
The Annex Joint Venture ceased operations on May 15, 1995, paid
final administrative expenses, and had no other available cash to
provide final distributions. The Joint Venture partnership
agreement provides for the dissolution of the Annex Joint Venture
upon mutual agreement of the Partnership and BREF 5. Accordingly,
the Partnership and BREF 5 have agreed to dissolve and will
formally terminate the Annex Joint Venture in 1996.
Property
The Partnership's operating properties are stated at cost
including adjustments for acquisition costs. Depreciation expense
is computed on the straight-line basis over the estimated useful
life of the property which approximates 31.5 years.
In March 1995, the FASB issued Statement No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment
<PAGE>
are present and the undiscounted cash flows estimated to
be generated by those assets are less than the assets' carrying
amount. The Partnership's adoption of Statement No. 121 in the
first quarter 1995 did not have a material effect on the financial
statements.
Fair Value of Financial Instruments
The Partnership adopted SFAS No. 107 in 1995, which requires
entities to disclose the fair value of financial assets and
liabilities for which it is practicable to estimate. Fair value is
defined in SFAS No. 107 as the amount at which the instrument could
be exchanged in a current transaction between willing parties,
other than a forced or liquidation sale. The financial assets and
liabilities of the Partnership include cash and cash equivalents,
due from affiliates, tenant receivables, accounts payable, and
mortgages payable.
At December 31, 1995, the Partnership believes the carrying
amount of its financial instruments, not including long-term debt,
approximates the fair value due to the relatively short maturity of
these instruments. The mortgages payable is believed to have a
fair value which approximates the carrying amount based upon the
current refinancing of Shoppes on the Parkway ("Shoppes") and
interest rates offered for debt of similar instruments in the
market for the remaining maturities. The Partnership has no other
significant financial instruments.
Cash Equivalents
The Partnership considers all highly liquid investments with a
maturity of 90 days or less when purchased to be a cash equivalent.
Amortization of Leasing Commissions
The Partnership records leasing commissions as an other asset in
the financial statements which is expensed over the term of the
applicable lease on the straight-line basis.
<PAGE>
Amortization of Loan Costs
The Partnership records loan costs as other assets on the
financial statements. Such costs are amortized over the term of
the applicable loan on a straight line basis.
Reclassifications
Certain amounts in the 1994 and 1993 financial statements have
been reclassified to conform to the 1995 presentation. This has
not affected the previously reported results of operations.
(3) PARTNERSHIP AGREEMENT
The restated Limited Partnership Agreement (the "Agreement")
provides that 99% of the net profits and losses from operations of
the Partnership for each fiscal year of the Partnership shall be
allocated to the Limited Partners and 1% of the net profits and
losses from operations during each of said fiscal years shall be
allocated to the General Partners.
All Operating Cash Flow, as such term is defined in the
Agreement, during any calendar year shall be distributed 99% to the
Limited Partners and 1% to the General Partners. The receipt by
the General Partners of such 1% of Operating Cash Flow shall be
subordinated to the receipt by the Limited Partners of Operating
Cash Flow equal to a 10% per annum, cumulative, non-compounded
return on Adjusted Investment, as such term is defined in the
Agreement (the "Preferential Distribution"). In the event the full
Preferential Distribution is not made in any year (herein referred
to as a "Preferential Distribution Deficiency") and Operating Cash
Flow is available in following years in excess of the Preferential
Distribution for said years, then the Limited Partners shall be
paid such excess Operating Cash Flow until they have been paid any
unpaid Preferential Distribution Deficiency from prior years. For
subscribers who were admitted as Limited Partners during 1986, the
term "Preferential Distribution" shall mean a 12% per annum,
cumulative, non-compounded return on Adjusted Investment.
A cash distribution for the fourth quarter of 1995 was made to
the Limited Partners on February 15, 1996 in the amount of
<PAGE>
$99,171. The Preferential Distribution Deficiency equaled
$3,490,805 after this last distribution.
(4) MORTGAGES PAYABLE
Mortgages payable at December 31, 1995 and 1994, consisted of the
following:
Interest Date
1995 1994 Rate Due
Shoppes on the Parkway(a) $6,064,427 $4,685,938 9.55% 4/02
Delchamps Plaza
North Shopping Center(b) 2,898,207 2,972,983 9.375% 12/96
$8,962,634 $7,658,921
(a) On April 6, 1995, the Partnership obtained a first mortgage
loan in the amount of $6,100,000 (the "First Mortgage Loan")
secured by Shoppes, from Morgan Stanley Mortgage Capital, Inc. (the
"Successor Lender"). The First Mortgage Loan bears interest at the
rate of 9.55% per annum, amortizes over a 25-year period, requires
monthly payments of principal and interest of approximately $53,500
and matures on April 6, 2002. A portion of the proceeds of the
First Mortgage Loan, approximately $4,675,000, were used to retire
the existing mortgage secured by Shoppes from Crown Life Insurance
Company. The remaining proceeds were used to pay loan closing
costs and a $999,919 return of capital distribution to the Limited
Partners.
As a precondition to the new financing, the Successor Lender
required that ownership of the property reside in a special purpose
entity ("SPE"). To accommodate the lender's requirements,
ownership of the property was transferred to the SPE,
Brauvin/Shoppes on the Parkway L.P. which is owned 99% by the
Partnership and 1% by an affiliate of the General Partners.
Distributions of Brauvin/Shoppes on the Parkway L.P. are
subordinated to a cumulative return to the Partnership. This
subordination will effectively preclude any distributions from the
SPE to affiliates of the General Partners. The creation of
Brauvin/Shoppes on the Parkway L.P. did not affect the
Partnership's economic ownership of the Shoppes property.
Furthermore, this change in ownership structure had no material
effect on the financial statements of the Partnership.
<PAGE>
(b) The Partnership is required to make a balloon mortgage
payment for Delchamps Plaza North Shopping Center ("Delchamps") in
the amount of $2,823,249 in December 1996. It is the General
Partners' intention to refinance this loan when it matures and, in
that regard, there have been initial conversations with the current
lender. There is no assurance that the General Partners will be
successful in their refinancing efforts in which case the
Partnership would sustain a loss upon foreclosure. The financial
statements do not reflect any adjustments that might result from
the outcome of this uncertainty.
The net carrying value of the Delchamps property and the Shoppes
property approximated $3,329,000 and $6,348,000, respectively at
December 31, 1995. Delchamps and Shoppes serve as collateral under
the respective nonrecourse debt obligations.
Interest paid on such mortgages during 1995, 1994 and 1993 was
$897,571, $765,613 and $776,984 respectively.
Maturities of the mortgages payable are as follows:
1996 $2,963,976
1997 72,332
1998 79,550
1999 87,489
2000 96,219
Thereafter 5,663,068
$8,962,634
(5) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid to the General Partners or their
affiliates for the years ended December 31, 1995, 1994 and 1993
were as follows:
1995 1994 1993
Management fees $101,685 $137,992 $127,054
Reimbursable office expenses 92,207 82,849 86,298
Legal fees 8,639 1,132 899
<PAGE>
The Partnership believes the amounts paid to affiliates are
representative of amounts which would have been paid to independent
parties for similar services. The Partnership had made all payments
to affiliates, except for $1,511 for legal services, as of December
31, 1995. In addition, the Partnership had a $730 and a $29,171
receivable from an affiliate at December 31, 1995 and 1994,
respectively.
The General Partners of the Partnership and Brauvin Real Estate
Fund L.P. 5, the General Partners of Brauvin/The Annex of
Schaumburg Associates ("The Annex"), determined that it was in the
best interest of the Partnership for the Annex to file for
reorganization under Chapter 11 of the bankruptcy code. The intent
of the bankruptcy filing was to seek financial reorganization and
protect the Partnership's interest in the Annex. Because the Annex
did not have the cash necessary to meet the expense of pursuing the
bankruptcy, the Partnership loaned the necessary funds to do so.
Future net cash flow generated by the Annex, if any, was intended
to be used to repay the loan balance prior to any distributions.
When ownership of the Annex was lost through foreclosure on May 15,
1995, the Partnership recorded a loss on the loan in the amount of
$164,380 and the balance was written off.
(6) INVESTMENT IN JOINT VENTURE
On December 31, 1986, the Partnership and Brauvin Real Estate
Fund L.P. 5("BREF 5") formed a joint venture (the "Joint Venture")
to purchase the Annex, a shopping center located in Schaumburg,
Illinois, for approximately $8,358,000. The Partnership had a 46%
interest in the Annex and BREF 5 had a 54% interest. The purchase
was funded with approximately $3,158,000 cash at closing and
$5,200,000 from the proceeds of an interim loan.
At the date of acquisition, the Annex was encumbered with an
existing first mortgage loan of approximately $4,356,600. The
outstanding principal balance was due on February 1, 1994. As this
loan was non-prepayable, the joint venture deposited approximately
$4,356,600 with Stewart Title Company (the "Title Company") and
paid a fee of approximately $293,000 to the Title Company in 1986
to service this loan.
<PAGE>
On January 31, 1994, the Annex Joint Venture entered into a
Reliance Agreement (the "Agreement") with the Title Company and
agreed to, on behalf of the Title Company, by the lender, John
Hancock Mutual Life Insurance Company (i) make a $1,000,000 paydown
on the loan;(ii) pay the Lender an administrative fee of 1.5% of
the loan balance, after the $1,000,000 paydown; and (iii) issue
title insurance as required. As a condition to the Annex Joint
Venture's agreement with the Title Company, the Title Company
agreed to pay the Annex Joint Venture $5,000 per month commencing
February 1, 1994 through January 31, 1995 and $6,000 per month
thereafter. The Title Company also agreed to equally share with
the Annex Joint Venture the 2.5% interest savings after the 1.5%
administrative fee was paid, which the Annex Joint Venture was
expected to receive upon maturity of the Agreement. In February
1994, the Title Company paid the Lender the $1,000,000 paydown, as
required in the Agreement. In 1995 and 1994, the Annex received
$5,000 and $55,000, respectively, from the Title Company, which was
recorded as a reduction of interest expense on the property. The
remaining amounts due from the Title Company were offset against
amounts owed to the Title Company. The Partnership will not
receive any additional payments under the Agreement.
On May 15, 1995, title to the Annex, was transferred to AUSA
through a sheriff's sale. As a result of reversion of the property
to the lender, the Annex Joint Venture recorded a $2,702,083
provision for investment property impairment to reduce the Annex
property to its estimated fair value. In addition, the Partnership
recorded an extraordinary gain on the extinguishment of debt in the
amount of $3,177,788, including the net reversals of approximately
$632,000 of accrued expenses.
The Annex Joint Venture ceased operations on May 15, 1995, paid
final administrative expenses, and had no other available cash to
provide final distributions. The Joint Venture partnership
agreement provides for the dissolution of the Annex Joint Venture
upon mutual agreement of the Partnership and BREF 5. Accordingly,
the Partnership and BREF 5 have agreed to dissolve and will
formally terminate the Annex Joint Venture in 1996.
<PAGE>
The following are condensed financial statements for the
Annex:
BALANCE SHEETS December 31,
1994
Land, building and personal
property, net $5,040,583
Other assets 3,066,872
$8,107,455
Promissory note payable $5,040,583
Other liabilities 3,513,471
8,554,054
Partners' (deficit) (446,599)
$8,107,455
<PAGE>
STATEMENTS OF OPERATIONS
Year Ended December 31
1995 (a) 1994 1993
Rental income $ 230,283 $ 549,029 $ 813,942
Other income 112,954 393,033 470,107
343,237 942,062 1,284,049
Mortgage and other
interest expense 12,677 224,604 562,388
Depreciation -- 161,553 187,342
Real estate taxes 125,540 445,220 482,644
Operating and
administrative expenses 234,126 280,272 278,333
372,343 1,111,649 1,510,707
Loss before provision
for investment property
impairment (29,106) (169,587) (226,658)
Provision for investment
property impairment (2,702,083) (882,709) (1,500,000)
Loss before extraordinary
item (2,731,189) (1,052,296) (1,726,658)
Extraordinary gain on
extinguishment of debt 3,177,788 -- --
Net income (loss) $ 446,599 $(1,052,296) $(1,726,658)
(a) For the period January 1, 1995 to May 15, 1995.
<PAGE>
(7) OPERATING LEASES
The Partnership is the lessor in operating lease agreements with
tenants at its various properties. The minimum future rental
income to be received on these operating leases (excluding
escalation amounts) is as follows:
1996 $1,533,193
1997 1,043,095
1998 866,422
1999 754,765
2000 626,186
Thereafter 2,352,626
Total $7,176,287
Contingent rental income approximated $142,000, $150,000 and
$170,000, in 1995, 1994 and 1993, respectively.
Rental income received from the anchor tenant of Delchamps
approximated 19%, 17% and 20% of rental income for the Partnership
for the years ended December 31, 1995, 1994 and 1993, respectively.
Rental income received from Ponderosa approximated 7.4%, 7.6% and
8% of rental income for the Partnership for the years ended
December 31, 1995, 1994 and 1993, respectively.
<PAGE>
<TABLE>
SCHEDULE III
BRAUVIN INCOME PROPERTIES L.P. 6
(a Delaware limited partnership)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<CAPTION>
Gross Amount at Which Carried
Initial Cost (a) at Close of Period (b)
Buildings, Buildings,
Personal Cost of Personal
Property and Subsequent Property and
Accumulated
Description Location Encumbrances(c) Land Improvements Improvements Land
Improvements Total Depreciation (b)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Del Champs Plaza Alabama $2,898,207 $ 839,171 $ 3,356,684 $ -- $ 839,171 $
3,356,684 $ 4,195,855 $ 866,392
Shoppes on the South
Parkway Carolina 6,064,427 1,560,516 6,242,063 191,843 1,560,516
6,433,906 7,994,422 1,646,044
Ponderosa
Restaurant Ohio -- 356,964 832,918 -- 356,964 832,918
1,189,882 191,917
$8,962,634 $2,756,651 $10,431,665 $191,843 $2,756,651 $10,623,508
$13,380,159 $2,704,353
<FN>
<F1>
NOTES:
(a) The cost of this real estate is $13,380,159 for tax purposes. Buildings are depreciated over
31.5 years and personal
property over 5 years using the straight line method. The properties were constructed
between 1981 and 1986.
(b) The following schedule summarizes the changes in the Partnership's real estate and
accumulated depreciation balances:
</FN>
<CAPTION>
Real estate 1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of year $13,352,785 $13,352,785 $13,271,425
Additions-land, buildings and improvements 27,374 -- 81,360
Balance at end of year $13,380,159 $13,352,785 $13,352,785
Accumulated depreciation 1995 1994 1993
Balance at beginning of year $ 2,344,202 $ 1,973,739 $ 1,621,472
Provision for depreciation 360,151 370,463 352,267
Balance at end of year $ 2,704,353 $ 2,344,202 $ 1,973,739
<FN>
<F2>
(c) Encumbrances: See Note 4 of Notes to the Financial Statements.
</FN>
</TABLE>
<PAGE>
Financial Statements
Brauvin/The Annex of Schaumburg Associates
(an Illinois General Partnership)
For the Years Ended December 31, 1994 and 1993
and the Period January 1, 1995 to May 15, 1995
with Report of Independent Auditors
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CONTENTS
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . S-2
Balance Sheet at December 31, 1994 . . . . . . . . . . . . . . . . . S-3
Statements of Operations for the Period January 1, 1995
to May 15, 1995 and for the Years Ended December 31,
1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Statements of Partners' Capital (Deficit) for the Period
January 1, 1995 to May 15, 1995 and for the Years Ended
December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . S-5
Statements of Cash Flows for the Period January 1, 1995
to May 15, 1995 and for the Years Ended December 31,
1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . S-7
<PAGE>
Report of Independent Auditors
To the Partners of
Brauvin/The Annex of Schaumburg Associates
We have audited the accompanying balance sheet of Brauvin/The Annex
of Schaumburg Associates listed in Item 14(a) of the annual report
on Form 10-K of Brauvin Income Properties L.P. 6 as of December 31,
1994, and the statements of partners' capital (deficit), operations
and cash flows for the period January 1, 1995 to May 15, 1995, and
for each of the two years in the period ended December 31, 1994.
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.
As described in Note 2 to the financial statements, the Partnership
Agreement provides for the dissolution of the Partnership upon
mutual agreement of the General Partners. On May 15, 1995, the
Partnership transferred title of its sole interest in real estate
to the lender. Accordingly, the General Partners began to dissolve
the Partnership.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Brauvin/The Annex of Schaumburg Associates at December 31, 1994,
and the results of its operations and its cash flows for the period
January 1, 1995 to May 15, 1995, and for the years ended December
31, 1994 and 1993 in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
January 9, 1996
<PAGE>
BALANCE SHEET
December 31,
1994
ASSETS
Cash $ 30,743
Escrow and other deposits 83,636
Tenant receivables (net of allowance for
Doubtful accounts of $2,665) 22,326
Other assets 586
Deposit with title company 2,929,581
3,066,872
Investment in real estate at cost:
Land 1,304,302
Buildings and personal property 5,308,537
6,612,839
Less: accumulated depreciation (1,572,256)
Total real estate, net of accumulated
depreciation 5,040,583
Total Assets $8,107,455
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Accounts payable and accrued expenses $ 86,932
Accrued real estate taxes payable 476,360
Security deposits 20,598
Promissory note payable 5,040,583
Mortgage note payable 2,929,581
Total Liabilities 8,554,054
Partners' capital (deficit) (446,599)
Total Liabilities and Partners'
Capital (Deficit) $8,107,455
See accompanying notes.
<PAGE>
STATEMENTS OF OPERATIONS
For the Period January 1, 1995 to May 15, 1995 and
for the Years Ended December 31, 1994 and 1993
1995 1994 1993
INCOME:
Rent $ 230,283 $ 549,029 $ 813,942
Interest 1,985 4,220 4,046
Other, primarily tenant
expense reimbursements 110,969 388,813 466,061
Total income 343,237 942,062 1,284,049
EXPENSES:
Interest on promissory
note payable 12,677 224,604 562,388
Depreciation -- 161,553 187,342
Real estate taxes 125,540 445,220 482,644
Operating 50,205 103,978 155,764
Repairs and maintenance 7,261 64,139 26,176
General and administrative 176,660 112,155 96,393
Total expenses 372,343 1,111,649 1,510,707
Income (loss) before
provision for investment
property impairment (29,106) (169,587) (226,658)
Provision for investment
property impairment (2,702,083) (882,709) (1,500,000)
Loss before extraordinary
item (2,731,189) (1,052,296) (1,726,658)
Extraordinary gain on
extinguishment of debt 3,177,788 -- --
Net income (loss) $ 446,599 $(1,052,296) $(1,726,658)
Net income (loss) allocated
to Brauvin Real Estate
Fund L.P. 5 $ 215,484 $ (568,240) $ (932,395)
Net income (loss) allocated
to Brauvin Income
Properties L.P. 6 $ 231,115 $ (484,056) $ (794,263)
See accompanying notes.
<PAGE>
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the Period January 1, 1995 to May 15, 1995 and
for the Years Ended December 31, 1994 and 1993
Brauvin
Brauvin Income
Real Estate Properties
Fund L.P. 5 L.P. 6 Total
Balance at January 1, 1993 $1,339,151 $1,093,204 $2,432,355
Net loss (932,395) (794,263) (1,726,658)
Cash distributions (54,000) (46,000) (100,000)
Balance at December 31, 1993 352,756 252,941 605,697
Net loss (568,240) (484,056) (1,052,296)
Balance at December 31, 1994 (215,484) (231,115) (446,599)
Net income 215,484 231,115 446,599
Balance at May 15, 1995 $ -- $ -- $ --
See accompanying notes.
<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS
For the Period January 1, 1995 to May 15, 1995 and
For the Years Ended December 31, 1994 and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash Flow From Operating Activities:
Net income (loss) $ 446,599 $(1,052,296) $(1,726,658)
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Gain on extinguishment of debt (3,177,788) -- --
Provision for investment
property impairment 2,702,083 882,709 1,500,000
Provision for doubtful accounts -- 14,000 25,000
Depreciation and amortization -- 170,661 241,401
Changes in assets and liabilities:
(Increase) decrease in
tenant receivables (25,457) (22,946) 34,896
Decrease in escrow and
other deposits 163,369 96,759 1,369
Decrease (increase) in due
from affiliates -- 2,835 (2,835)
Decrease in other assets 586 451 1,234
(Decrease) increase in accounts
payable and accrued expenses (21,568) 25,516 46,721
Decrease in interest payable -- (42,508) --
Increase in due to affiliates 149,685 -- --
(Decrease) increase in accrued
real estate taxes payable (114,052) (31,140) 214
Increase (decrease) in
security deposits 2,000 (4,158) 110
Net cash provided by
operating activities 125,457 39,883 121,452
Cash Flow From Investing Activities:
Capital expenditures (11,500) -- (6,330)
Cash used in investing activities (11,500) -- (6,330)
Cash Flow From Financing Activities:
Principal repayments on
promissory note payable (144,700) (21,130) (39,232)
Principal repayments on
mortgage note payable (18,504) (1,223,613) (41,397)
Decrease in deposit with
title company 18,504 1,223,613 41,397
Cash distributions to
General Partners -- -- (100,000)
Net cash used in financing
activities (144,700) (21,130) (139,232)
Net (decrease) increase in
cash (30,743) 18,753 (24,110)
Cash at beginning of period 30,743 11,990 36,100
Cash at end of period $ -- $ 30,743 $ 11,990
<FN>
<F1>
See accompanying notes.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
On December 31, 1986, Brauvin Real Estate Fund L.P. 5 ("BREF5")
and Brauvin Income Properties L.P. 6 ("BIP6"), formed a joint
venture, Brauvin/The Annex of Schaumburg Associates (the
"Partnership"), which purchased the Annex of Schaumburg Shopping
Center ("the Annex"). The joint venture is owned 54% by BREF5 and
46% by BIP6. The General Partners of BREF5 are Brauvin Ventures,
Inc., Jerome J. Brault and Cezar M. Froelich. The General Partners
of BIP6 are Brauvin 6, Inc., Jerome J. Brault and Cezar M.
Froelich. Brauvin Ventures, Inc. and Brauvin 6, Inc. are owned by
the A.G.E. Realty Corporation (50%) and by Messrs. Brault (25%) and
Froelich (25%).
(2) TERMINATION OF PARTNERSHIP AFFAIRS
On May 15, 1995, title to the Annex, the sole property held by
the Partnership, was transferred to AUSA Life Insurance Company,
Inc. ("AUSA") through a sheriff's sale. The Partnership ceased
operations on May 15, 1995, paid final administrative expenses, and
had no other available cash to provide final distributions. The
Partnership Agreement provides for the dissolution of the
Partnership upon mutual agreement of the General Partners.
Accordingly, the General Partners have agreed to dissolve and will
formally terminate the Partnership in 1996.
As a result of reversion of the property to the lender, the
Partnership adopted FASB Statement No. 121, Accounting for the
Impairment of Long Lived Assets and for Long Lived Assets to be
Disposed Of, and recorded a $2,702,083 provision for investment
property impairment to reduce the Annex property to its estimated
fair value. In accordance with this Statement no depreciation
expense was recorded during 1995. In addition, the Partnership
recorded an extraordinary gain on the extinguishment of debt in the
amount of $3,177,788, including the net reversals of approximately
$632,000 of accrued expenses.
<PAGE>
(3) SIGNIFICANT ACCOUNTING POLICIES
Income Taxes
No provision for federal income taxes has been made in the
financial statements, as the liability for such taxes is that of
the Partners of Brauvin Real Estate Fund L.P. 5 and Brauvin Income
Properties L.P. 6.
Property
The Partnership's rental property was stated at cost adjusted for
impairments in value, as discussed below. Depreciation expense was
computed on the straight-line basis over the estimated useful life
of the property which equaled 38 years.
The Partnership made periodic assessments concerning possible
permanent impairment to the value of its property. In the event
that the Partnership determined that a permanent impairment in
value had occurred, the carrying basis of the property was reduced
to its estimated fair value.
Allocation of Income
For financial statement purposes, in previous years BREF5 and
BIP6 were allocated income and loss in accordance with the profit
and loss percentages in the Partnership Agreement. In order for
the capital accounts of BREF5 and BIP6 to appropriately reflect
their respective remaining economic interest, BIP6 was allocated an
additional $25,679 of income and BREF5 was allocated an additional
loss in 1995 for financial statement purposes.
Reclassifications
Certain amounts in the 1994 and 1993 financial statements have
been reclassified to conform to the 1995 presentation. This has
not affected the previously reported results of operations.
(4) PARTNERSHIP AGREEMENT
The Partnership Agreement provides that all operating profits and
losses and cash flow, all profits or losses from the sale or
refinancing, and all proceeds from the sale of property will be
allocated 54% to BREF5 and 46% to BIP6. See Note 3 for further
information regarding the allocation of 1995 operations.
<PAGE>
(5) PROMISSORY NOTE PAYABLE
The promissory note payable bore interest at a rate of 10% per
annum, with monthly payments of principal and interest based upon
a 30-year amortization schedule of $45,630 commencing December 1,
1989. The remaining principal balance of approximately $5,023,000
matured on November 1, 1994. The note was collateralized by a
first mortgage lien on the Annex. Interest paid approximated
$17,677, $270,500 and $508,800 in 1995, 1994 and 1993,
respectively.
The Partnership did not make its monthly mortgage payments that
were due to AUSA on July 1, 1994, August 1, 1994, September 1, 1994
or October 1, 1994. In addition the Partnership did not repay the
mortgage loan which matured November 1, 1994, at which time the
entire amount of principal and accrued interest became due and
payable. On August 11, 1994, the Partnership received a notice of
default from AUSA demanding the payments due July 1, 1994 and
August 1, 1994.
On August 23, 1994, the Partnership filed a voluntary petition
for bankruptcy (Chapter 11) in the United States Bankruptcy Court
in the Northern District of Illinois. On February 10, 1995, the
Bankruptcy Court ordered the dismissal of the voluntary petition
for bankruptcy and AUSA filed a motion for appointment of a
receiver against the Partnership. On February 17, 1995, the motion
was granted and an order was issued. The receiver had full power
and authority to operate, manage and conserve the Annex pursuant to
the order. On February 15, 1995, the Partnership received an
amended notice of mortgage foreclosure from AUSA. The Partnership
did not file an answer to the amended foreclosure that was due
March 17, 1995. On April 3, 1995, a judgment of foreclosure and
sale was entered into against the Partnership. A sheriff's sale of
the Annex was held on May 10, 1995 and on May 15, 1995 title was
transferred to AUSA, in satisfaction of the Partnership's
obligation on the promissory note payable.
(6) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses paid to the General Partners
or their affiliates for the period January 1, 1995 to May 15, 1995
and for the years ended December 31, 1994 and 1993 were as follows:
<PAGE>
1995 1994 1993
Management fees $7,074 $53,705 $78,535
Reimbursable office expenses 3,121 18,807 21,273
In addition to expenses presented above, the General Partners or
their affiliates reimbursed the Partnership for $149,685 in legal
expenses in 1995. The total amount due to affiliates which was
written-off due to foreclosure, was $192,508.
The Partnership believes the amounts paid to affiliates were
representative of amounts that would have been paid to independent
parties for similar services. As of December 31, 1994, $42,823 was
payable to affiliates.
(7) INVESTMENT IN REAL ESTATE
At the date of acquisition, The Annex was encumbered with an
existing first mortgage loan of approximately $4,356,600, which
bears interest at a rate of 13% per annum. The outstanding
principal balance was due on February 1, 1994. As this loan was
non-prepayable, the joint venture deposited approximately
$4,356,600 with Stewart Title Company (the "Title Company") and
paid a fee of approximately $293,000 to the Title Company in 1986
to service this loan.
On January 31, 1994, the Partnership entered into a Reliance
Agreement (the "Agreement") with the Title Company and agreed to,
on behalf of the Title Company, by the lender, John Hancock Mutual
Life Insurance Company (the "Lender") an extension of the maturity
date of the original 13% loan. The Lender agreed to extend the
loan until August 1, 1995 and decrease the interest rate to 10.5%
on the condition that the Title Company (i) makes a $1,000,000
paydown on the loan; (ii) pays the Lender an administrative fee of
1.5% of the loan balance, after the $1,000,000 paydown; and (iii)
issue title insurance as required. As a condition to the
Partnership's agreement with the Title Company, the Title Company
agreed to pay the Partnership $5,000 per month commencing February
1, 1994 through January 31, 1995 and $6,000 per month thereafter.
<PAGE>The Title Company has also agreed to equally share with the
Partnership the 2.5% interest savings after the 1.5% administrative
fee is paid, which the Partnership is expected to receive upon
maturity of the Agreement. In February 1994, the Title Company
paid the Lender the $1,000,000 paydown, as required in the
Agreement. In 1995 and 1994, the Annex received $5,000 and
$55,000, respectively, ($5,000 per month) from the Title Company,
<PAGE>
which was recorded as a reduction of interest expense on the
property.
In 1994, the Partnership determined that an additional impairment
to the asset value of the Annex had occurred and was the result of
deteriorating market conditions caused by an excess supply of
available space and the order of dismissal of the voluntary
petition for bankruptcy. The property was written down to the
property's approximate outstanding nonrecourse mortgage balance as
of December 31, 1994. A $882,709 provision for impairment loss was
charged to operations in 1994. In 1993, the property was written
down to the Partnership's best estimate of the property's fair
value and a $1,500,000 provision for impairment loss was charged to
operations at that time.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 561,479
<SECURITIES> 0 <F1>
<RECEIVABLES> 306,837
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 13,380,159 <F2>
<DEPRECIATION> 2,704,353
<TOTAL-ASSETS> 12,173,054
<CURRENT-LIABILITIES> 0
<BONDS> 8,962,634 <F3>
0
0
<COMMON> 2,933,731 <F4>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,173,054
<SALES> 0
<TOTAL-REVENUES> 2,322,670 <F5>
<CGS> 0
<TOTAL-COSTS> 2,268,643 <F6>
<OTHER-EXPENSES> (231,115) <F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 924,883
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 285,142
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> "SECURITIES" REPRESENTS INVESTMENTS IN JOINT VENTURE
<F2> "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND
BUILDING]
<F3> "BONDS" REPRESENTS MORTGAGES PAYABLE
<F4> "COMMON" REPRESENTS TOTAL PARTNERS CAPITAL
<F5> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F6> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES
<F7> "OTHER EXPENSES" REPRESENTS EQUITY INTEREST IN JOINT
VENTURES' NET INCOME
</FN>
</TABLE>
