<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1996
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
(Name of small business issuer 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
(Issuer's telephone number)
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)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the issuer was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of issuer's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year $2,264,461.
The aggregate sales price of the limited partnership interests of
the issuer (the "Units") to unaffiliated investors of the issuer 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
established trading market for these Units, nor have any of the
Units been sold within the last 60 days.
Portions of the Prospectus of the issuer 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 II and III of this Annual Report on Form 10-KSB.
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
1996 FORM 10-KSB ANNUAL REPORT
INDEX
PART I
Page
Item 1. Description of Business . . . . . . . . . . . . . . . . . . . .3
Item 2. Description of 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 Issuer's Limited Partnership
Interests and Related Security Holder Matters . . . . . . . . 12
Item 6 Management's Discussion and Analysis or Plan
of Operation. . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 7 Financial Statements and Supplementary Data . . . . . . . . . 18
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . 18
PART III
Item 9. Directors and Executive Officers, Promoters
and Control Persons; in compliance with Section
16(a) of the Exchange Act . . . . . . . . . . . . . . . . . . 20
Item 10. Executive Compensation. . . . . . . . . . . . . . . . . . . . 23
Item 11. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . . . 24
Item 12. Certain Relationships and Related Transactions. . . . . . . . 24
Item 13. Exhibits, Financial Statements and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 26
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
<PAGE>
PART I
Item 1. Description of 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, 1996, 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, and the joint venture was terminated and dissolved in 1996.
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 (an affiliate
of the General Partners). The focus of property management
activities has been 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 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. Expectations are that due to a stable
economic environment, rental rates will remain flat or increase
slightly. The average 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 $15.00 per square foot in 1996.
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. Description of Properties.
The following is a discussion of the rental properties owned and
operated by the Partnership during 1996. 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.
In the opinion of the General Partners, the Partnership has
provided for adequate insurance coverage of its real estate
investment properties.
During the year ended December 31, 1996, 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 bore interest at a rate of 9.375% per annum and matured on
December 1, 1996. Prior to the scheduled maturity of the first
mortgage loan, the Lender granted the Partnership an extension until
February 1, 1997. On January 14, 1997, the Partnership obtained a
first mortgage loan in the amount of $2,925,000(the "First Mortgage
Loan") secured by Delchamps from NationsBanc Mortgage Capital
Corporation. The First Mortgage Loan bears interest at the rate of
9.03% per annum, is amortized over a 25-year period, requires
monthly payments of principle and interest of approximately $24,600
and matures on February 1, 2002. A portion of the proceeds of the
First Mortgage Loan, approximately $2,809,000, were used to retire
the existing mortgage secured by Delchamps from Lincoln National
Life Insurance Company.
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 and Harco
Drug, a Tuscaloosa based drug store chain. Delchamps has eight
stores and was 98% occupied at December 31, 1996.
The occupancy rate and average annual base rent per square foot
at December 31 for the last two years are as follows:
1996 1995
Occupancy Rate 98% 100%
Average Annual Base
Rent Per Square Foot $7.80 $7.73
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, 1996:
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 6,332 69,642 Various Various
Vacant 1,200 --
59,389 $458,569
(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
approximately $53,500 and matures on April 6, 2002. A portion of
the proceeds of the First Mortgage Loan, approximately $4,675,000,
was used to retire the existing mortgage secured by Shoppes. 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, 1996. To retain
tenants and to attract customers to the Shoppes 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 two years are as follows:
1996 1995
Occupancy Rate 97% 97%
Average Annual Base
Rent Per Square Foot $15.01 $13.17
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, 1996:
Annual Lease
Square Base Expiration Renewal
Tenant Feet Rent Date Options
All Tenants 84,506 $1,268,497 Various Various
Vacant 2,360 --
86,866 $1,268,497
(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
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
two years are as follows:
1996 1995
Average Annual Base Rent
Per Square Foot $23.64 $23.64
The Annex of Schaumburg (the "Annex")
On May 10, 1995 the Partnership no longer had ownership of 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 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 paid a fee of
approximately $293,000 to the Title Company in 1986 to service this
loan.
On January 31, 1994, the 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 Joint Venture's
agreement with the Title Company, the Title Company agreed to pay
the 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 Joint Venture the 2.5%
interest savings after the 1.5% administrative fee was paid, which
the 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 Joint Venture 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 in 1995.
The 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 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 Joint Venture received a notice of default from AUSA
demanding the payments due July 1, 1994 and August 1, 1994.
On August 23, 1994, the 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 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 Joint Venture's
obligation on the promissory note payable.
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 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 Joint Venture'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 Issuer's Limited Partnership Interests and
Related Security Holder Matters.
At December 31, 1996, there were 610 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 1996
and 1995 were $373,062, and $245,921, 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.
Item 6. Management's Discussion and Analysis or Plan of Operation.
General
Certain statements in this Annual Report that are not historical
fact constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Discussions
containing forward-looking statements may be found in this section
and in the section entitled "Description of Business." Without
limiting the foregoing, words such as "anticipates," "expects,"
"intends," "plans" and similar expressions are intended to identify
forward-looking statements. These statements are subject to a
number of risks and uncertainties. Actual results could differ
materially from those projected in the forward-looking statements.
The Partnership undertakes no obligation to update these forward-looking
statements to reflect future events or circumstances.
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. See Item 2 for a
description of the mortgage modifications affected to date.
On May 15, 1995, title to the Annex, the sole joint venture
property held by the Joint Venture was transferred to 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 agreed to dissolve and formally terminated
the Joint Venture in 1996.
As a result of reversion of the property to 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.
The Partnership was required to make a balloon mortgage payment
for Delchamps in December 1996 in the amount of $2,823,000. Prior
to the scheduled maturity of the first mortgage loan, the Lender
granted the Partnership an extension until February 1, 1997. On
January 14, 1997, the Partnership obtained a first mortgage loan in
the amount of $2,925,000(the "First Mortgage Loan") secured by
Delchamps from NationsBanc Mortgage Capital Corporation. The First
Mortgage Loan bears interest at the rate of 9.03% per annum, is
amortized over a 25-year period, requires monthly payments of
principle and interest of approximately $24,600 and matures on
February 1, 2002. A portion of the proceeds of the First Mortgage
Loan, approximately $2,809,000 were used to retire the existing
mortgage secured by Delchamps from Lincoln National Life Insurance
Company.
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. Operating cash flow of the
Partnership decreased in 1995 compared to 1994, primarily due to the
increase of expenses pertaining to the foreclosure of the Annex.
Operating cash flow of the Partnership has increased in 1996 when
compared to 1995.
Below is a table summarizing the historical data for distribution
per Limited Partnership Interest for the last two years:
Distribution
Date 1997 1996 1995
February 15 $15.39 $12.65 $ 5.04
May 15 13.06 13.12
August 15 10.88 (a)
November 15 11.00 13.20
(a) The August 15, 1995 distribution was a return of capital
distribution of $999,919 in total, which was $127.50 per unit.
A distribution of Operating Cash Flow for the fourth quarter of
1996 was made to the Limited Partners on February 15, 1997 in the
amount of $120,729. The Preferential Distribution Deficiency
equaled $3,723,359 after this last distribution, a $232,554 increase
over 1995.
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 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. These market conditions, all beyond the control
of the Partnership and its General Partners, have affected the real
estate industry since the late 1980's and have combined to cause
severe economic hardships for real estate owners. Some of the
specific market conditions are as follows:
The savings and loan crisis resulted in the creation of the
Resolution Trust Corp. (RTC). The RTC sponsored auctions
where large blocks of properties were sold at distressed
prices. The low price paid by the new owners enabled them to
reduce asking rental rates resulting in significantly lower
market rents for all competing properties.
The emergence of "Category Killer" retailers who occupied
large "Box" spaces in new developments known as "Power
Centers" attracted tenants from the smaller and more
traditional "Community Centers" resulting in increased
vacancies and downward pressure on market rental rates.
The continuing softness in retail sales has resulted in store
closings. This has in turn resulted in increased vacancies
and an overall softness in demand for retail space which
results in downward pressure on market rents.
These conditions have generally adversely impacted the
Partnership's property economics. The specific impact of these
economic conditions on 1996 and 1995 results are discussed in the
section "Results of Operations - 1996 Compared to 1995", below.
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. 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.
Results of Operation - 1996 Compared to 1995
(Amounts rounded to nearest 000's)
The Partnership generated net income of $245,000 in 1996,
compared to income of $285,000 in 1995, a decrease of $40,000. This
decrease resulted from a $59,000 decrease in total income, a
$249,000 decrease in total expenses, and a $231,000 decrease in the
equity interest in the Joint Venture's net income.
Total income was $2,264,000 in 1996 compared to $2,323,000 in
1995, a decrease of $59,000. The $59,000 decrease was caused by a
decrease in income at Del Champs. This decrease was due primarily
to a decrease in the occupancy from 100% in 1995 to 98% in 1996.
Also, Ponderosa income decreased which was a result of a decline in
percentage rent earned.
Total expenses incurred in 1996 were $2,019,000 compared to
$2,269,000 in 1995 a decrease of $250,000. This decrease was caused
primarily by a $172,000 decrease in administrative expenses
primarily associated with the Annex foreclosure. Interest expense
is lower in the amount of $59,000. This decrease was caused
primarily by the interest expense at Shoppes decreasing in
comparison to 1995 when default interest was paid before the
refinancing on April 5, 1995. Repairs and maintenance expenses have
decreased $73,000 when comparing 1996 to 1995. In 1995 there were
various outdoor repairs at Shoppes and Del Champs which were not
necessary in 1996.
Results of Operations - 1995 Compared to 1994
(Amounts rounded to nearest 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.
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.
Item 7. Financial Statements and Supplementary Data.
See Index to Financial Statements on Page F-1 of this Form 10-KSB
for financial statements where applicable.
The financial information required in Item 310(b) of Regulation
S-B is not applicable.
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
On December 6, 1996, the Partnership dismissed Ernst & Young LLP
as its independent accountant. Ernst & Young LLP's report on the
financial statements for either of the past two years did not
contain an adverse opinion or disclaimer of opinion and was not
modified as to uncertainty, audit scope or accounting principles.
The decision to change the Partnership's accountant was made at the
recommendation of the General Partners to reduce the costs
associated with the audit. In the Partnership's fiscal years ended
1994 and 1995 and the subsequent interim period preceding the
dismissal there were no disagreements with Ernst & Young LLP on any
matter of accounting principles or practices, financial statement
disclosure or audit scope or procedure which would have caused Ernst
& Young LLP to make reference to the matter in their report. There
were no reportable events as that term is described in Item
304(a)(1)(iv)(B) of Regulation S-B.
On December 6, 1996, the Partnership engaged Deloitte & Touche LLP
as its independent accountant. The decision to engage Deloitte &
Touche LLP was made following consideration by the General Partners.
Neither the Partnership (nor someone on its behalf) consulted
Deloitte & Touche LLP regarding: (i) the application of accounting
principles to a specific transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the
Partnership's financial statements; or (ii) any matter that was
either the subject of a disagreement or a reportable event.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
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. B. Allen Aynessazian . . . . . . . . . . . . . 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 63) chairman of the board of directors,
director and president of Brauvin 6, Inc. Since 1979, he has been
a shareholder, president and director of Brauvin/Chicago, Ltd. He
is an officer, director and one of the principal shareholders of
various Brauvin entities, which act as the general partners of eight
publicly registered real estate programs. He is an officer,
director and one of the principal shareholders of Brauvin
Associates, Inc., Brauvin Management Company, Brauvin Advisory
Services, Inc. and Brauvin Securities Inc. Mr. Brault received a
B.S. in Business from DePaul University, Chicago, Illinois in 1959.
MR. JAMES L. BRAULT (age 36) is vice president and secretary of
Brauvin 6 Inc. He is an officer of various Brauvin entities, which
act as the general partners of seven publicly registered real estate
programs. Mr. Brault is executive vice president, assistant
secretary and responsible for the overall operations of Brauvin
Management Company. Prior to joining the Brauvin organization in
May 1989, he was a Vice President of the Commercial Real Estate
Division of the First National Bank of Chicago ("First Chicago"),
based in their Washington, D.C. office. Mr. Brault joined First
Chicago in 1983 and his responsibilities included the organization
and management of a loan portfolio in excess of $150 million. Mr.
Brault received a B.A. in Economics from Williams College,
Williamstown, Massachusetts in 1983 and an M.B.A. in Finance and
Investments from George Washington University, Washington, D.C. in
1987. Mr. Brault is the son of Mr. Jerome J. Brault.
Mr. CEZAR M. FROELICH (age 51) 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, but he remains an
individual general partner.
Mr. ROBERT J. HERLETH (age 44) is a Vice President and Director
of 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 65) is a Director of 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. B. ALLEN AYNESSIAN (age 32) is the Treasurer and Chief
Financial Officer of Brauvin 6, Inc. He is the Chief Financial
Officer of various Brauvin publicly registered real estate programs.
He is responsible for the overall financial accounting of Brauvin
Management Company, Brauvin Financial Inc. and related partnerships.
He is responsible for Partnership's accounting and financial
reporting to regulatory agencies. He joined the Brauvin
organization in August 1996. Prior to that time, he was the Chief
Financial Officer of Giordano's Enterprises, a privately held,
40-restaurant, family-style pizza chain in the Chicago metropolitan
area where he worked since 1989. While at Giordano's, Mr.
Aynessazian was responsible for all accounting functions, lease
negotiations and financings of new restaurants, equipment and
general corporate debt. From 1987 to 1989, Mr. Aynessazian worked
in the accounting compliance and tax department of KPMG Peat
Marwick. Mr. Aynessazian is a certified public accountant.
<PAGE>
Item 10. 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 9. Reference is
also made to Notes 2 and 4 of the Notes to Financial Statements
filed with this annual report for a description of such
distributions and allocations.
The General Partners received a share of Partnership income or
loss for 1996 and 1995.
An affiliate of the General Partners 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 - h) Not applicable.
<PAGE>
Item 11. 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 10, "Executive Compensation."
Item 12. 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 9. Cezar M. Froelich is an individual general partner of the
Partnership and is also a principal of the law firm of Shefsky &
Froelich Ltd., which acted as securities and real estate counsel to
the Partnership. Reference is made to Note 4 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 Shoppes, 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 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 and BREF 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 and the balance was written off.
(c) No management persons are indebted to the Partnership.
(d) There have been no transactions with promoters.
<PAGE>Item 13. Exhibits, Financial Statements, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(1) (2) Financial Statements (See Index to Financial
Statements filed with this annual report).
(3) Exhibits required by the Securities and Exchange
Commission Regulation S-B 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
**16. Letter of Change in Certifying Accountant
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:
** Incorporated by reference from exhibit 16 filed with the Fund's
Form 8-K/A filed on December 12, 1996.
(b) No portions of the annual report have been incorporated by
reference in this Form 10-KSB.
(C) Form 8-K. On December 6, 1996, the Partnership dismissed Ernst &
Young LLP as its independent accountant. Additionally,
on December 6, 1996 the Partnership engaged
Deloitte & Touche LLP to be its independent accountant.
This Form 8-K was dated December 6, 1996 and filed on
December 12, 1996.
(d) An annual report for the fiscal year 1996 will be sent to
the Limited Partners subsequent to this filing.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant 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/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer and
Treasurer
INDIVIDUAL GENERAL PARTNERS
/s/ Jerome J. Brault
Jerome J. Brault
/s/ Cezar M. Froelich
Cezar M. Froelich
Dated: 3/31/97
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report. . . . . . . . . . . . . . . F-2
Report of Independent Auditors. . . . . . . . . . . . . . F-3
Balance Sheet, December 31, 1996 . . . . . . . . . . . . F-4
Statements of Operations, for the years ended
December 31, 1996 and 1995 . . . . . . . . . . . . . . . F-5
Statements of Partners' Capital, for the
years ended December 31, 1996 and 1995 . . . . . . . . . F-6
Statements of Cash Flows, for the years
ended December 31, 1996 and 1995 . . . . . . . . . . . . F-7
Notes to Financial Statements . . . . . . . . . . . . . . F-8
All other schedules provided for in Item 13(a) of Form 10-KSB are
either not required, not applicable or immaterial.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Brauvin Income Properties L.P. 6
We have audited the accompanying balance sheet of Brauvin Income
Properties L.P. 6 (a limited partnership) as of December 31,
1996, and the related statements of operations, partners'
capital, and cash flows for the year then ended. 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 audit. The financial
statements of the Partnership for the year ended December 31,
1995 were audited by other auditors whose report, dated March 8,
1996, expressed an unqualified opinion on those statements.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such 1996 financial statements present fairly, in
all material respects, the financial position of Brauvin Income
Properties L.P. 6 at December 31, 1996, and the results of its
operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 10, 1997
(February 15, 1997 as to Note 2)
<PAGE>
Report of Independent Auditors
To the Partners of
Brauvin Income Properties L.P. 6
We have audited the accompanying statements of operations, partners'
capital, and cash flows of Brauvin Income Properties L.P. 6 for the
year ended December 31, 1995. 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
audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the results of operations and cash
flows of Brauvin Income Properties L.P. 6 for the year ended
December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Chicago, Illinois
March 8, 1996
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
BALANCE SHEET
December 31,
1996
ASSETS
Investment in real estate:
Land $ 2,756,651
Buildings and improvements 10,667,827
13,424,478
Less accumulated depreciation (3,075,791)
Net investment in real estate 10,348,687
Cash and cash equivalents 623,087
Rent receivable (net of
allowances of $24,034) 269,810
Escrow and other deposits 433,259
Other assets 195,653
Total Assets $11,870,496
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Mortgage notes payable (Note 3) $ 8,814,769
Accounts payable and accrued
expenses 244,990
Tenant security deposits 4,783
Total Liabilities 9,064,542
PARTNERS' CAPITAL:
General Partners 9,802
Limited Partners (7,842.5
limited partnership units
issued and outstanding) 2,796,152
Total Partners' Capital 2,805,954
Total Liabilities and
Partners' Capital $11,870,496
See accompanying notes to financial statements
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
STATEMENTS OF OPERATIONS
For the years ended December 31, 1996 and 1995
1996 1995
INCOME
Rental (Note 6) $1,845,313 $1,836,363
Interest 35,877 54,355
Other, primarily
expense reimbursements 383,271 431,952
Total income 2,264,461 2,322,670
EXPENSES
Interest 866,458 924,883
Depreciation 375,982 370,382
Real estate taxes 130,628 131,975
Repairs and maintenance 27,246 100,218
Management fees 146,370 142,680
Other property operating 201,447 155,457
General and administrative 271,045 443,048
Total expenses 2,019,176 2,268,643
Income before interest
in joint venture 245,285 54,027
Equity interest in
joint venture's
net income -- 231,115
Net income $ 245,285 $ 285,142
Net income
allocated to the
General Partners $ 2,453 $ 2,851
Net income
allocated to the
Limited Partners $ 242,832 $ 282,291
Net income per
limited partnership
interest (7,842.5 units) $ 30.96 $ 36.00
See accompanying notes to financial statements
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 1996 and 1995
General Limited
Partners Partners* Total
Balance, January 1, 1995 $ 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, December 31, 1995 7,349 2,926,382 2,933,731
Net income 2,453 242,832 245,285
Cash distributions -- (373,062) (373,062)
Balance, December 31, 1996 $ 9,802 $2,796,152 $2,805,954
* Cash distributions to Limited Partners per unit were $47.57 and
$31.36 for the years ended December 31, 1996 and 1995, respectively.
A return of capital distribution to Limited Partners per unit was
$127.50 in 1995.
See accompanying notes to financial statements
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996 and 1995
1996 1995
Cash Flows From Operating Activities:
Net income $ 245,285 $ 285,142
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 375,982 370,382
Provision for doubtful accounts 24,599 1,800
Equity interest in Joint Venture's
net income -- (231,115)
Loss on loan to affiliate -- 164,380
Decrease (increase) in rent
receivable 12,428 (38,682)
Increase in escrow and other
deposits (12,163) (346,256)
Decrease (increase) in due
from affiliates 730 (135,939)
(Increase) decrease in other
assets (23,383) 31,171
(Decrease) increase in accounts
payable and accrued expenses (26,116) 162,462
Decrease in security deposits (800) (1,164)
Net cash provided by operating
activities 596,562 262,181
Cash Flows From Investing Activities:
Capital expenditures (14,027) (46,393)
Cash used in investing
activities (14,027) (46,393)
Cash Flows From Financing Activities:
Repayment of mortgage notes payable (147,865) (4,796,287)
Proceeds from refinancing -- 6,100,000
Loan fees -- (157,953)
Return of capital -- (999,919)
Cash distributions to Limited
Partners (373,062) (245,921)
Net cash used in financing activities (520,927) (100,080)
Net increase in cash and cash
equivalents 61,608 115,708
Cash and cash equivalents at
beginning of year 561,479 445,771
Cash and cash equivalents at end
of year $ 623,087 $ 561,479
Supplemental disclosure of cash flow information:
Cash paid for mortgage interest $ 845,063 $ 897,571
See accompanying notes to financial statements
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1996 and 1995
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 Inc. (50%) and by Messrs. Jerome J.
Brault (beneficially) (25%) and Cezar M. 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.
The Partnership has acquired the land and buildings underlying
Delchamps Shopping Center ("Delchamps"), Shoppes on the Parkway
("Shoppes") and a Ponderosa Restaurant ("Ponderosa").
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management's Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Accounting Method
The accompanying financial statements have been prepared using
the accrual method of accounting.
Rental Income
Rental income is recognized on a straight line basis over the
life of the related leases. Differences between rental income
earned and amounts due per the respective lease agreements are
credited or charged, as applicable, to deferred rent receivable.
Federal Income Taxes
Under the provisions of the Internal Revenue Code, the
Partnership's income and losses are reportable by the partners on
their respective income tax returns. Accordingly, no provision is
made for Federal income taxes in the financial statements.
Investment in Joint Venture Partnership
The Partnership owned a 46% interest and Brauvin Real Estate Fund
L.P. 5 ("BREF 5") owned a 54% interest in Brauvin/The Annex of
Schaumburg Associates (the "Annex Joint Venture") which owned the
Annex, a shopping center located in Schaumburg, Illinois. The
investment was recorded using the equity method.
On May 15, 1995, title to the Annex, the sole property owned by
the Annex Joint Venture 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
Annex Joint Venture 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 Joint Venture'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 agreed to dissolve and formally
terminated the Annex Joint Venture in 1996.
Investment in Real Estate
The Partnership's rental properties are stated at cost including
acquisition costs, leasing commissions, tenant improvements and net
of provision for impairment. Depreciation and amortization are
recorded on a straight-line basis over the estimated economic lives
of the properties, which approximate 31.5 years, and the term of
the applicable leases, respectively. Two of the Partnership's
properties are subject to liens under first mortgages (See Note 3).
In 1995, The Partnership adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(SFAS 121). The Partnership has performed an analysis of its long-
lived assets, and the Partnership's management determined that
there were no events or changes in circumstances that indicated
that the carrying amount of the assets may not be recoverable at
December 31, 1996. Accordingly, no impairment loss has been
recorded in the accompanying financial statements for the years
ended December 31, 1996 and 1995.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt
instruments with an original maturity within three months of
purchase.
Estimated Fair Value of Financial Instruments
Disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments." The estimated fair value amounts
have been determined by using available market information and
appropriate valuation methodologies. However, considerable
judgement is necessarily required in interpreting market data to
develop estimates of fair value.
The fair value estimates presented herein are based on
information available to management as of December 31, 1996, but
may not necessarily be indicative of the amounts that the
Partnership could realize in a current market exchange. The use of
different assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts. Although
management is not aware of any factors that would significantly
affect the estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements
since that date, and current estimates of fair value may differ
significantly from amounts presented herein.
The carrying amounts of the following items are reasonable
estimates of fair value: cash and cash equivalents; escrow and
other deposits and accounts payable and accrued expenses. The
mortgage notes payable at December 31, 1996 have a fair value of
approximately $8,900,000 based upon current interest rates offered
for debt of similar instruments in the market.
Reclassifications
Certain reclassifications have been made to the 1995 financial
statements to conform to classifications adopted in 1996.
(2) 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 1996 was made to
the Limited Partners on February 15, 1997 in the amount of
$120,729. The Preferential Distribution Deficiency equaled
$3,723,359 after this last distribution.
(3) MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1996, consisted of the
following:
Interest Date
1996 Rate Due
Shoppes on the Parkway(a) $5,998,658 9.55% 4/02
Delchamps Plaza
North Shopping Center(b) 2,816,111 9.375% 2/97
$8,814,769
The net carrying value of the Delchamps property and the Shoppes
property approximated $3,222,900 and $6,154,300, respectively, at
December 31, 1996. Delchamps and Shoppes serve as collateral under
the respective nonrecourse debt obligations.
Maturities of the mortgages payable are as follows:
1997 $ 2,888,442
1998 79,550
1999 87,489
2000 96,219
2001 105,821
Thereafter 5,557,248
$8,814,769
(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.
(b) The Partnership was required to make a balloon mortgage
payment for Delchamps in the amount of $2,823,249 in December 1996.
Prior to the scheduled maturity of the first mortgage loan, the
Lender granted the Partnership an extension until February 1, 1997.
On January 14, 1997, the Partnership obtained a first mortgage loan
in the amount of $2,925,000(the "First Mortgage Loan") secured by
Delchamps from NationsBanc Mortgage Capital Corporation. The First
Mortgage Loan bears interest at the rate of 9.03% per annum, is
amortized over a 25-year period, requires monthly payments of
principle and interest of approximately $24,600 and matures on
February 1, 2002. A portion of the proceeds of the First Mortgage
Loan, approximately $2,809,000, were used to retire the existing
mortgage secured by Delchamps from Lincoln National Life Insurance
Company.
(4) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid to the General Partners or their
affiliates for the years ended December 31, 1996, and 1995 were as
follows:
1996 1995
Management fees $146,370 $101,685
Reimbursable office expenses 78,551 92,207
Legal fees 679 8,639
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 $1,076 for legal services, as of December
31, 1996.
The General Partners and BREF 5, the General Partners of the
Annex Joint Venture determined that it was in the best interest of
the Partnership for the Annex Joint Venture 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 Joint Venture.
Because the Annex Joint Venture 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.
(5) EQUITY INVESTMENT
On December 31, 1986, the Partnership and BREF 5 formed the Annex
Joint Venture to purchase the Annex, a shopping center located in
Schaumburg, Illinois, for approximately $8,358,000. The Partnership
had a 46% general partnership interest in the Annex and BREF 5 had
a 54% general partnership 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 Annex 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 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 Joint Venture 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 did not receive
any additional payments under the Agreement.
On May 15, 1995, title to the Annex was transferred to the lender
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 Annex Joint
Venture 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 Annex Joint Venture 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 agreed to dissolve and terminated the Annex
Joint Venture in 1996.
The following are condensed financial statements for the Joint
Venture:
STATEMENTS OF OPERATIONS
For the period
January 1, 1995
to May 15, 1995
Rental income $ 230,283
Other income 112,954
343,237
Mortgage and other
interest expense 12,677
Real estate taxes 125,540
Operating and
administrative expenses 234,126
372,343
Loss before provision
for investment property
impairment and
extraordinary item (29,106)
Provision for investment
property impairment (2,702,083)
Loss before extraordinary
item (2,731,189)
Extraordinary gain on
extinguishment of debt 3,177,788
Net income $ 446,599
<PAGE>
(6) 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:
1997 $1,712,557
1998 1,495,484
1999 1,383,967
2000 1,152,912
2001 906,016
Thereafter 1,903,231
Total $8,554,167
Contingent rental income approximated $112,000 and $142,000 in
1996 and 1995, respectively.
Collection of future rental income under these lease agreements
is subject to the financial stability of the underlying tenants.
Rental income received from the anchor tenant of Delchamps
approximate 18% and 19% of rental income for the Partnership for
the years ended December 31, 1996 and 1995, respectively. Rental
income received from Ponderosa approximate 7.3% and 7.4% of rental
income for the Partnership for the years ended December 31, 1996
and 1995, respectively.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 623,087
<SECURITIES> 0 <F1>
<RECEIVABLES> 269,810
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 13,424,478 <F2>
<DEPRECIATION> 3,075,791
<TOTAL-ASSETS> 11,870,496
<CURRENT-LIABILITIES> 0
<BONDS> 8,814,769 <F3>
0
0
<COMMON> 2,805,954 <F4>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,870,496
<SALES> 0
<TOTAL-REVENUES> 2,264,461 <F5>
<CGS> 0
<TOTAL-COSTS> 1,152,718 <F6>
<OTHER-EXPENSES> 0 <F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 866,458
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 245,285
<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 LESS INTEREST EXPENSE
<F7> "OTHER EXPENSES" REPRESENTS EQUITY INTEREST IN JOINT
VENTURES' NET INCOME
</FN>
</TABLE>
