<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the three months ended June 30, 2000
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 as specified in its charter)
Delaware 36-1276801
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 North LaSalle Street, Chicago, Illinois 60602
(Address of principal executive offices) (Zip Code)
(312) 759-7660
(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 past 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 .
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
(a Delaware limited partnership)
INDEX
PART I
Page
Item 1. Consolidated Financial Statements . . . . . . . . . . . . . . .3
Consolidated Statement of Net Assets in Liquidation
as of June 30, 2000 (Liquidation Basis) . . . . . . . . . . . .4
Consolidated Statement of Changes in Net Assets
in Liquidation for the period January 1, 2000 to
June 30, 2000 (Liquidation Basis) . . . . . . . . . . . . . . .5
Consolidated Statements of Operations for the
six months ended June 30, 2000 (Liquidation Basis)
and the six months ended June 30, 1999 (Going
Concern Basis). . . . . . . . . . . . . . . . . . . . . . . . .6
Consolidated Statements of Operations for the
three months ended June 30, 2000 (Liquidation
Basis) and the three months ended June 30, 1999
(Going Concern Basis) . . . . . . . . . . . . . . . . . . . . .7
Consolidated Statement of Cash Flows for the
six months ended June 30, 1999 (Going Concern
Basis) . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Notes to Consolidated Financial Statements . . . . . . . . . 9
Item 2. Management's Discussion and Analysis or Plan
of Operation. . . . . . . . . . . . . . . . . . . . . . . . . 18
PART II
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 27
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . 27
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . 27
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . 27
Item 6. Exhibits, and Reports on Form 8-K . . . . . . . . . . . . . . 27
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
(a Delaware limited partnership)
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
The following Consolidated Statement of Net Assets in Liquidation
as of June 30, 2000 (Liquidation Basis), Consolidated Statement of
Changes in Net Assets in Liquidation for the period January 1, 2000
to June 30, 2000 (Liquidation Basis), Consolidated Statements of
Operations for the six months ended June 30, 2000 (Liquidation
Basis) and the six months ended June 30, 1999 (Going Concern
Basis), Consolidated Statements of Operations for the three months
ended June 30, 2000 (Liquidation Basis) and the three months ended
June 30, 1999 (Going Concern Basis) and the Consolidated Statement
of Cash Flows for the six months ended June 30, 1999 (Going Concern
Basis) for Brauvin Income Properties L.P. 6 (the "Partnership") are
unaudited but reflect, in the opinion of the management, all
adjustments necessary to present fairly the information required.
All such adjustments are of a normal recurring nature.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the
Partnership's 1999 Annual Report on Form 10-KSB.
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
June 30, 2000 (LIQUIDATION BASIS)
(Unaudited)
ASSETS
Real estate held for sale $16,655,025
Cash and cash equivalents 727,540
Rent receivable (net of
allowances of $116,100) 52,055
Escrow and other deposits 678,904
Total Assets 18,113,524
LIABILITIES
Mortgage notes payable (Note 4) 8,532,485
Accounts payable and accrued
expenses 201,909
Deferred gain on sale of property (Note 2) 7,175,804
Reserve for liquidation costs (Note 2) 151,870
Due to affiliate 9,090
Tenant security deposits 13,549
Total Liabilities 16,084,707
Net Assets in Liquidation $ 2,028,817
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS) FOR THE PERIOD
JANUARY 1,2000 TO June 30, 2000
(Unaudited)
Net assets at January 1, 2000 $1,930,945
Income from operations 235,848
Distributions to Limited Partners (a) (137,976)
Net assets in liquidation at June 30, 2000 $2,028,817
(a) Distributions to Limited Partners were approximately $17.60 per
Unit.
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended June 30,
(Unaudited)
(Liquidation (Going Concern
Basis) Basis)
2000 1999
INCOME
Rental $ 888,833 $ 913,336
Interest 27,434 16,888
Other, primarily tenant
expense reimbursements 144,033 201,533
Total income 1,060,300 1,131,757
EXPENSES
Interest 402,695 428,104
Depreciation -- 177,828
Real estate taxes 60,444 57,097
Repairs and maintenance 13,424 13,142
Management fees (Note 5) 62,633 76,419
Other property operating 93,122 79,838
General and administrative 192,134 115,229
Total expenses 824,452 947,657
Net income $ 235,848 $ 184,100
Net income allocated to the
General Partners $ 2,358 $ 1,841
Net income allocated to the
Limited Partners $ 233,490 $ 182,259
Net income per limited partnership
interest (7,842.5 units) $ 29.77 $ 23.24
See accompanying notes to consolidated financial statements
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended June 30,
(Unaudited)
(Liquidation (Going Concern
Basis) Basis)
2000 1999
INCOME
Rental $440,925 $412,279
Interest 14,707 8,438
Other, primarily tenant
expense reimbursements 65,394 99,855
Total income 521,026 520,572
EXPENSES
Interest 200,899 214,406
Depreciation -- 88,914
Real estate taxes 30,222 28,549
Repairs and maintenance 7,044 4,832
Management fees (Note 5) 30,182 37,988
Other property operating 48,940 25,747
General and administrative 121,585 74,692
Total expenses 438,872 475,128
Net income $ 82,154 $ 45,444
Net income allocated to the
General Partners $ 822 $ 454
Net income allocated to the
Limited Partners $ 81,332 $ 44,990
Net income per limited partnership
interest (7,842.5 units) $ 10.37 $ 5.74
See accompanying notes to consolidated financial statements
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1999
(GOING CONCERN BASIS)
(Unaudited)
Cash Flows From Operating Activities:
Net income $ 184,100
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 177,828
Provision for doubtful accounts 8,661
Changes in:
Rent receivable 73,512
Escrow and other deposits (33,772)
Due from affiliate (15,510)
Other assets (23,074)
Accounts payable and accrued expenses (29,191)
Due to affiliate 4,740
Net cash provided by operating activities 347,294
Cash Flows From Financing Activities:
Repayment of mortgage notes payable (59,675)
Cash distributions to Limited Partners (272,952)
Net cash used in financing activities (332,627)
Net increase in cash and cash equivalents 14,667
Cash and cash equivalents at
beginning of year 776,207
Cash and cash equivalents at end of period $ 790,874
Supplemental disclosure of cash flow information:
Cash paid for mortgage interest $ 409,010
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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. and
Jerome J. Brault. On August 8, 1997, Mr. Cezar M. Froelich
resigned as a Individual General Partner effective 90 days from
August 14, 1997. Brauvin 6, Inc. is owned by the A.G.E. Realty
Corporation Inc.(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.
The Partnership has acquired the land and buildings underlying
Delchamps Shopping Center ("Delchamps"), Shoppes on the Parkway
("Shoppes") and a Ponderosa Restaurant ("Ponderosa").
<PAGE>
BRAUVIN INCOME PROPERTIES L.P. 6
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 consolidated financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Basis of Presentation
As a result of the July 12, 1999 authorization by a majority of
the Limited Partners to sell the Partnership's properties the
Partnership has begun the liquidation process and, in accordance
with generally accepted accounting principles, the Partnership's
financial statements for periods subsequent to July 12, 1999 have
been prepared on a liquidation basis. Accordingly, the carrying
value of the assets is presented at estimated net realizable
amounts and all liabilities are presented at estimated settlement
amounts, including estimated costs associated with carrying out the
liquidation. Preparation of the financial statements on a
liquidation basis requires significant assumptions by management,
including the estimate of liquidation costs and the resolution of
any contingent liabilities. There may be differences between the
assumptions and the actual results because events and circumstances
frequently do not occur as expected. Those differences, if any,
could result in a change in the net assets recorded in the
statement of net assets as of June 30, 2000.
Accounting Method
The accompanying consolidated financial statements have been
prepared using the accrual method of accounting.
Rental Income
Prior to the conversion from the going concern basis to the
liquidation basis of accounting, rental income was 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 were 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 consolidated financial
statements.
Consolidation of Special Purpose Entities
The Partnership has two special purpose entities ("SPE"),
Brauvin/Shoppes on the Parkway L.P. and Brauvin/Delchamps L.P.,
which are each owned 99% by the Partnership and 1% by an affiliate
of the General Partners. Distributions from each of the SPE's are
subordinated to the Partnership which effectively precludes any
distributions from an SPE to affiliates of the General Partners.
The creation of each SPE did not affect the Partnership's economic
ownership of the properties. Furthermore, this change in ownership
structure had no material effect on the consolidated financial
statements of the Partnership.
Investment in Real Estate
Prior to the conversion from the going concern basis to the
liquidation basis of accounting, the Partnership's rental
properties were stated at cost including acquisition costs.
Depreciation was recorded on a straight-line basis over the
estimated economic lives of the properties which approximate 31.5
years.
Subsequent to the adoption of the liquidation basis of
accounting, the Partnership adjusted its investments in real estate
to estimated net realizable value, which is recorded as real estate
held for sale. Additionally, the Partnership suspended recording
any further depreciation expense.
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 June 30, 2000 and
December 31, 1999, 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.
In connection with the adoption of the liquidation basis of
accounting, assets were adjusted to estimated net realizable value
and liabilities were adjusted to estimated settlement amounts,
which approximates their fair value at June 30, 2000.
(2) ADJUSTMENT TO LIQUIDATION BASIS
On July 12, 1999, in accordance with the liquidation basis of
accounting, assets were adjusted to estimated net realizable value
and liabilities were adjusted to estimated settlement amounts,
including estimated costs associated with carrying out the
liquidation. The net adjustment required to convert from the going
concern (historical cost) basis to the liquidation basis of
accounting was a decrease in assets of $278,713 which was included
in the December 31, 1999 statement of changes in net assets in
liquidation. Significant changes in the carrying value of assets
and liabilities are summarized as follows:
Increase in real estate held for sale (a) $7,175,804
Write-off of deferred rent receivable (25,878)
Write-off of mortgage costs (100,965)
Increase in deferred gain on sale
of real estate (7,175,804)
Estimated liquidation costs (151,870)
Total adjustment to liquidation basis $ (278,713)
(a) Net of estimated closing costs.
Due to the bankruptcy and rejection of the lease by Del Champs
Inc. and the related pending vacancy at the Del Champs Shopping
Center the Partnership's investment in real estate held for sale
and the deferred gain on the sale of real estate were each reduced
by $303,225 in the second quarter.
(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 1999 was made to
the Limited Partners on February 15, 2000 in the amount of
$137,976. There was no distribution for the first or second
quarter of 2000, which would have been paid May 15, 2000 and August
15, 2000. The Preferential Distribution Deficiency equaled
$4,556,859 at June 30, 2000.
(4) MORTGAGE NOTES PAYABLE
Mortgage notes payable at June 30, 2000, consisted of the
following:
Interest Date
2000 Rate Due
Shoppes on the Parkway(a) $5,712,323 9.55% 5/01/02
Delchamps Plaza
North Shopping Center(b) 2,820,162 9.03% 2/01/02
$8,532,485
The net carrying value of the Delchamps property and the
Shoppes property approximated $4,455,775 and $10,999,000,
respectively, at June 30, 2000. Delchamps and Shoppes serve as
collateral under the respective nonrecourse debt obligations.
Maturities of the mortgage notes payable are as follows:
2000 $ 70,592
2001 146,554
2002 8,315,339
$8,532,485
(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 May 1, 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 consolidated 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
principal 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, was used to retire the existing
mortgage secured by Delchamps from Lincoln National Life Insurance
Company.
As a precondition to the new financing on Delchamps, the lender
required that ownership of the property reside in a SPE. To
accommodate the lender's requirements, ownership of the property
was transferred to the SPE, Brauvin/Delchamps L.P., which is owned
99% by the Partnership and 1% by an affiliate of the General
Partners. Distributions of Brauvin/Delchamps 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/Delchamps L.P. did not affect the Partnership's economic
ownership of the Delchamps property. Furthermore, this change in
ownership structure had no material effect on the consolidated
financial statements of the Partnership.
In the second quarter of 2000, the Partnership was informed
that the largest single tenant at the Delchamps Shopping Center
(the "Shopping Center") located in Tuscaloosa, Alabama has rejected
its lease under its Chapter 11 bankruptcy petition. Delchamps,
Inc., the former tenant, a wholly owned subsidiary of Jitney
Jungle, is in the process of selling its fixtures and equipment
from this store. Upon completion of this sale the tenant will be
returning the keys to the Partnership. In addition, the Rite Aid
drugstore has the ability to cancel its lease with the Partnership
if a suitable grocery anchor is not obtained within four months of
the grocery store closing. If the Rite Aid cancels its lease the
total vacancy rate at the Shopping Center would be over 87% and the
rental revenue from the Shopping Center would decrease by
approximately 82%.
The Partnership is currently negotiating a debt restructuring
with the mortgage lender.
Additionally, in the second quarter, the Partnership began to
negotiate a debt restructuring plan with the mortgage lender. The
Partnership stopped making the monthly payments required under the
mortgage loan in June and on August 10, 2000 the Partnership was
informed that the mortgage lender has accelerated the mortgage
loan. The Partnership continues to communicate with the mortgage
lender in an attempt to achieve a workable restructuring of the
mortgage loan.
(5) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid or payable to the General Partners
or their affiliates for the six months ended June 30, 2000 and 1999
were as follows:
2000 1999
Management fees $ 62,633 $ 76,419
Reimbursable office expenses 74,378 61,740
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 $9,090 for management fees, as
of June 30, 2000.
<PAGE>
Item 2. Management's Discussion and Analysis of Plan of
Operation.
General
Certain statements in this Quarterly Report that are not
historical fact constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
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.
Year 2000
The "Year 2000" problem concerned the inability of computer
technology systems to correctly identify and process date sensitive
information beyond December 31, 1999. Many computers
automatically add the "19" prefix to the last two digits the
computer reads for the year when date information is needed in
computer software programs. Thus when a date beginning on January
1, 2000 is entered into a computer, the computer may interpret this
date as the year "1900" rather than "2000".
The computer information technology systems which support the
Partnership consists of a network of personal computers linked to
a server built using hardware and software from mainstream
suppliers. These systems do not have equipment that contains
embedded microprocessors, which may also pose a potential Year 2000
problem. Additionally, there is no internally generated software
coding to correct as all of the software is purchased and licensed
from external providers.
The Partnership utilizes two main software packages that
contain date sensitive information, (i) accounting and (ii)
investor relations. In 1997, a program was initiated and completed
to convert from the existing accounting software to a new software
program that is Year 2000 compliant. In 1998, the investor
relations software was also updated to a new software program that
is Year 2000 compliant. All costs associated with these
conversions were expensed by the Partnership as incurred, and were
not material. Management does not believe that any further
expenditures will be necessary for the systems to be Year 2000
compliant. However, additional personal computers may be purchased
from time to time to replace existing machines.
Also in 1997, management of the Partnership initiated formal
communications with all of its significant third party vendors,
service providers and financial institutions to determine the
extent to which the Partnership is vulnerable to those third
parties failure to remedy their own Year 2000 issue. There can be
no guarantee that the systems of these third parties were converted
and will not have an adverse effect on the Partnership.
The Partnership has no formal Year 2000 contingency plan.
The Partnership has not experienced any material adverse impact
on its operations or its relationships with tenants, vendors or
others.
Liquidity and Capital Resources
The Partnership intends to satisfy its short-term liquidity
needs through cash reserves and cash flow from the properties.
Mortgage notes payable are expected to be satisfied through
property sales.
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 $53,000 and matures on May
1, 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.
Early in the Shoppes marketing process, the Partnership
received an expression of interest that was below the property's
appraised value. Although the property has been marketed broadly,
we have not received any other offers to date. We believe this is
due the changing tenancy of "outlet centers" similar to Shoppes.
In particular, the tenant mix at our 87,000 square foot center is
evolving away from fashion retailers toward generally smaller,
local tenants. Many of the national retailers are moving to
significantly larger, "mega-centers." This has caused our
occupancy to decline. We are seeking to find an anchor tenant,
such as a gourmet grocery, to attract more activity to the center.
We will continue to market the space for lease and the property for
sale. However, the success of the leasing activity will directly
drive the results of the sales efforts.
The Ponderosa Restaurant property is the smallest asset owned by
the Partnership and it does not have any debt associated with it.
Because of its high cash flow, we believe it is in the best
interest of the Partnerships to sell this property last. Also,
because of its relatively small size (approximately 5,400 sq. ft.),
it is likely that there will be a larger number of potential buyers
for this property. Accordingly, although Grub and Ellis has been
engaged to market this property, we have not received any offers on
this property to date.
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
principal 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, was used to retire the existing
mortgage secured by Delchamps from Lincoln National Life Insurance
Company.
In the second quarter of 2000, the Partnership was informed
that the largest single tenant at the Delchamps Shopping Center
(the "Shopping Center") located in Tuscaloosa, Alabama has rejected
its lease under its Chapter 11 bankruptcy petition. Delchamps,
Inc., the former tenant, a wholly owned subsidiary of Jitney
Jungle, is in the process of selling its fixtures and equipment
from this store. Upon completion of this sale the tenant will be
returning the keys to the Partnership. In addition, the Rite Aid
drugstore has the ability to cancel its lease with the Partnership
if a suitable grocery anchor is not obtained within four months of
the grocery store closing. If the Rite Aid cancels its lease the
total vacancy rate at the Shopping Center would be over 87% and the
rental revenue from the Shopping Center would decrease by
approximately 82%.
To address these difficult issues, the Partnership engaged
Coldwell Banker Commercial to market the center for lease to a
broad variety of potential users. To date, the center has been
well received; but we do not yet have any firm prospects to release
the anchor space. Further, the costs of re-tenanting the space
could be significant.
In addition, the Partnership has approached the lender and
requested certain modifications to the existing loan. These
modifications will allow the Partnership additional time to market
the vacant anchor space for lease, and the center itself for sale,
during this period of limited occupancy and cash flow. The
Partnership began to negotiate a debt restructuring plan with the
mortgage lender. The Partnership stopped making the monthly
payments required under the mortgage loan in June and on August
10, 2000 the Partnership was informed that the mortgage lender has
accelerated the mortgage loan. The Partnership continues to
communicate with the mortgage lender in an attempt to achieve a
workable restructuring of the mortgage loan.
Primarily as a result of the occupancy loss at Del Champs, the
General Partners have temporarily deferred distributions. The
General Partners will likely continue to defer distributions until
we have received feedback from our lender regarding its willingness
to modify the loan terms, or until we have identified a replacement
tenant. Further, the General Partners believe it is prudent to
build reserves as quickly as possible. The Partnership will likely
need these funds to pay debt service or pay for tenant improvement
costs for replacement tenants.
Below is a table summarizing the historical data for
distribution per Limited Partnership Interest for the last two
years:
Distribution
Date 2000 (A) 1999 1998
February 15 $17.59 $16.49 $16.49
May 15 17.21 17.21
August 15 17.40 17.40
November 15 17.59 17.59
(A) A cash distribution for the fourth quarter of 1999 was made to
the Limited Partners on February 15, 2000 in the amount of
$137,976. There was no distribution for the first or second
quarter 2000, which would have been paid May 15, 2000, and August
15, 2000, respectively.
On October 15, 1998, the Partnership received notice that an
unsolicited tender offer to purchase up to 10% of the outstanding
Units was to commence with a tender price of $475 per Unit. The
offer was made, in part, by an entity that owned a nominal economic
interest in the Partnership and terminated on November 13, 1998.
As a result of this tender offer 115 economic interests in the
Partnership were transferred.
On October 22, 1998, Limited Partners were mailed, without the
consent or knowledge of the General Partners, an additional tender
offer to purchase up to 4.9% of the outstanding Units of the fund
for $500 per Unit, less any transfer fees. This offer was made by
an entity that did not own any interests in the Partnership and
expired on December 2, 1998. As a result of this tender offer 382
economic interests in the Partnership were transferred.
On May 12, 1999, the Partnership received notice that an
unsolicited tender offer to purchase up to approximately 10% of the
outstanding Units was to commence with a tender price of $650 per
Unit. The offer was made, in part, by an entity that owned a
nominal economic interest in the Partnership and expired on June
25, 1999. As a result of this tender offer 158 economic interests
in the Partnership were transferred.
The General Partners remained neutral as to the particular merits
or risks associated with any of the tender offers to the Limited
Partners. The General Partners believed an informed determination
of the true value of the Units could be made after the receipt of
the appraisals. The General Partners stated that the value of the
Units after the receipt of the appraisals may be more or less than
the tender offers.
The General Partners further informed the Limited Partners that,
for those investors who are primarily interested in liquidating
their Units immediately, the tender offers provided such an
opportunity.
In 1998, the General Partners notified the Limited Partners that
they were exploring various alternatives to sell the Partnership's
assets. In this regard, the Partnership engaged a nationally known
appraisal firm to value the Partnership's assets. Additionally,
this firm will assist the General Partners in determining the
appropriate method and timing for the disposition of the
Partnership's assets.
The General Partners determined to pursue the disposition of the
Partnership's assets. In 1999, the Partnership solicited and
received the votes of the Limited Partners to approve a sale of all
of the Partnership's properties, either on an individual or group
basis, and to subsequently liquidate the Partnership. The
solicitation, which was approved by the Limited Partners in the
third quarter of 1999, stated that the Partnership's properties may
be sold individually or in any combination provided that the total
sales price for the properties included in the transaction equals
or exceeds 70% of the aggregate appraised value for such
properties, which valuation was conducted by an independent third
party appraisal firm.
The Partnership intends to sell the properties under a closed bid
process which will include identification of target buyers with
proven financing ability and performance of certain evaluations of
the properties, such as environmental testing. Potential buyers
will be requested to sign confidentiality agreements to safeguard
the Partnership's confidential proprietary information. The
General Partners have determined that each bid must be all cash,
completely unconditional and accompanied by a substantial deposit.
To date, over 250 potential purchasers have been contacted
regarding the sale of the properties. Of those contacted,
approximately 120 potential buyers have registered to receive
packages on one or more of the properties. In addition, the
properties are listed on the Internet at Loopnet.com, the largest
commercial real estate website in the nation.
As a result of the July 12, 1999 authorization by a majority of
the Limited Partners to sell the Partnership's properties the
Partnership has begun the liquidation process and, in accordance
with generally accepted accounting principles, the Partnership's
financial statements for periods subsequent to July 12, 1999 have
been prepared on a liquidation basis. Accordingly, the carrying
value of the assets is presented at estimated net realizable
amounts and all liabilities are presented at estimated settlement
amounts, including estimated costs associated with carrying out the
liquidation. Preparation of the financial statements on a
liquidation basis requires significant assumptions by management,
including the estimate of liquidation costs and the resolution of
any contingent liabilities. There may be differences between the
assumptions and the actual results because events and circumstances
frequently do not occur as expected. Those differences, if any,
could result in a change in the net assets recorded in the
statement of net assets as of June 30, 2000 and December 31, 1999.
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 refinancing or sale
proceeds. These cash needs include, among other things,
maintenance of working capital reserves in compliance with the
Agreement as well as payments for major repairs, tenant
improvements and leasing commissions in support of real estate
operations.
Results of Operations - Six Months Ended June 30, 2000 (Liquidation
Basis) and the Six Months Ended June 30, 1999 (Going Concern Basis)
(Amounts rounded to nearest $000's)
The Partnership generated net income of $236,000 for the six
months ended June 30, 2000 as compared to net income of $184,000
for the same six month period in 1999. The $52,000 increase in net
income resulted primarily from a $124,000 decrease in total
expenses which was partially offset by a $72,000 decrease in total
income.
Total income for the six months ended June 30, 2000 was
$1,060,000 as compared to $1,132,000 for the same six month period
in 1999, a decrease of $72,000. The $72,000 decrease resulted
primarily from a decrease in rental income at Shoppes due to a
decrease in the occupancy, and a decrease in percentage rental
income caused by lower sales of several tenants. In addition other
tenant expense reimbursements are lower primarily as a result of
the tenancy problems at the Del Champs property as described above.
For the six months ended June 30, 2000 total expenses were
$824,000 as compared to $948,000 for the same six month period in
1999, a decrease of $124,000. The decrease of $124,000 was due
primarily to a decrease in depreciation of $178,000. Prior to the
adoption of the liquidation basis of accounting depreciation was
recorded on a straight line basis over the estimated economic lives
of the properties. Upon the adoption of the liquidation basis of
accounting, real estate held for sale was adjusted to estimated net
realizable value and no depreciation expense has been recorded.
There also was a $25,000 decrease in interest expense. These
decreases were offset by an increase in general and administrative
expense of $79,000, which was primarily associated with an increase
in bad debt expense at Del Champs.
Results of Operations - Three months ended June 30, 2000
(Liquidation Basis) and the Three months ended June 30, 1999 (Going
Concern Basis)
(Amounts rounded to nearest $000's)
The Partnership generated net income of $82,000 for the three
months ended June 30, 2000 as compared to net income of $45,000 for
the same three month period in 1999. The $37,000 increase in net
income resulted primarily from a $37,000 decrease in total expense.
Total income for the three months ended June 30, 2000 was
$521,000 as compared to $521,000 for the same three month period in
1999.
For the three months ended June 30, 2000 total expenses were
$439,000 as compared to $476,000 for the same three month period in
1999, a decrease of $37,000. The decrease of $37,000 was due
primarily to a decrease in depreciation expense of $89,000.
Partially offsetting the decrease in depreciation expense was an
increase of $47,000 in general and administrative expense.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters To a Vote of Security
Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
Exhibit 27. Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BY: Brauvin 6, Inc.
Corporate General Partner of
Brauvin Income Properties L.P. 6
BY:
Jerome J. Brault
Chairman of the Board of
Directors and President
DATE: August 14, 2000
BY:
Thomas E. Murphy
Chief Financial Officer and
Treasurer
DATE: August 14, 2000
<PAGE>
