<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1999
or
[ ] Transition Report Under 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.)
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 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 year $2,133,858.
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.
BRAUVIN INCOME PROPERTIES L.P. 6
1999 FORM 10-KSB ANNUAL REPORT
INDEX
PART I
Page
Item 1. Description of Business . . . . . . . . . . . . . . . . . . . .3
Item 2. Description of Properties . . . . . . . . . . . . . . . . . . .6
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. Consolidated Financial Statements and
Supplementary Data. . . . . . . . . . . . . . . . . . . . . . 20
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . 20
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; in compliance with Section
16(a) of the Exchange Act . . . . . . . . . . . . . . . . . . 21
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, Consolidated Financial Statements and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 26
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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 the past real estate market conditions and
economic trends in the areas where the Partnership's properties are
located, the General Partners believed it to be in the best
interest of the Partnership to retain the properties until such
time as the General Partners reasonably believed it was appropriate
to dispose of the Partnership's properties. In order to make this
determination, the General Partners periodically evaluated market
conditions. In 1998, the General Partners notified the Limited
Partners that they will explore various alternatives to sell the
Partnership's assets. In this regard, the Partnership engaged
nationally known appraisal firms to value the Partnership's assets.
Additionally, these firms 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 MONTH, 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.
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.
On October 15, 1998, the Partnership received notice that an
unsolicited tender offer to purchase up to 10% of the outstanding
limited partnership interests of the Partnership (the "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 to 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
Partnership 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
proxy 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 this tender offer. 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.
As of December 31, 1999, the Partnership owned three rental
properties. The Partnership owned a 46% interest in a joint
venture (the "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 has retained ownership of its
properties for periods longer than anticipated at acquisition.
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
local economic environment, rental rates will remain flat or
increase slightly at the Partnership's properties. The average
spot rental rates for tenants at the Shoppes on the Parkway
shopping center in Hilton Head, South Carolina have increased from
approximately $13.00 per square foot in 1993 to approximately
$17.05 per square foot in 1999. The average spot rental rates for
tenants at the Delchamps Plaza North shopping center in Tuscaloosa,
Alabama have increased from approximately $8.36 per square foot in
1993 to approximately $11.33 per square foot in 1999.
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.
Item 2. Description of Properties.
The following is a discussion of the rental properties owned
and operated by the Partnership during 1999. 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, 1999, 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 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. The
outstanding mortgage balance encumbered by this property was
$2,835,311 at December 31, 1999.
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 100% occupied at December 31, 1999.
The occupancy rate and average annual base rent per square foot
at December 31 for the last two years were as follows:
1999 1998
Occupancy Rate 100% 100%
Average Annual Base
Rent Per Square Foot $7.99 $7.92
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, 1999:
Annual Lease
Square Base Expiration Renewal Nature of
Tenant Feet Rent Date Options Business
Delchamps 42,057 $315,427 1/2007 4/5 years ea. Grocery
Store
Harco Drugs 9,800 73,500 1/2002 4/5 years ea. Drug
Store
Others 7,532 85,338 Various Various
59,389 $474,265
(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 May
1, 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. The outstanding mortgage balance encumbered by
this property was $5,759,289 at December 31, 1999.
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 81% occupied at December 31, 1999. To
retain tenants and to attract customers to the Shoppes the
Partnership completed various improvements to the property in 1997.
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 were as follows:
1999 1998
Occupancy Rate 81% 92%
Average Annual Base
Rent Per Square Foot $15.96 $15.15
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, 1999:
Annual Lease
Square Base Expiration Renewal
Tenant Feet Rent Date Options
All Tenants 69,982 $1,193,297 Various Various
Vacant 16,884 --
86,866 $1,193,297
(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.
In 1999 Ponderosa declined to exercise its repurchase right but
maintains its ability to repurchase this property in five years.
The Ponderosa property 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:
1999 1998
Average Annual Base Rent
Per Square Foot $23.64 $23.64
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.
Item 3. Legal Proceedings.
None.
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, 1999, there were 550 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 1999
and 1998 were $547,404 and $548,380, respectively.
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.
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.
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.
The Partnership has paid annual cash distributions to Limited
Partners since 1986, as many of the Partnership's properties have
been operating in strong retail markets.
Below is a table summarizing the historical data for
distributions per Limited Partnership Interest for the last two
years:
Distribution
Date 2000 1999(A) 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) The May distribution was made on May 17, 1999.
A distribution of Operating Cash Flow for the fourth quarter of
1999 was made to the Limited Partners on February 15, 2000 in the
amount of $137,976. The Preferential Distribution Deficiency
equaled $4,208,073 after this last distribution, a $150,169
increase over 1998.
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 MONTH, 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.
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 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
The Partnership's revenue and expenses are affected primarily
by the operations of the properties. Property operations, and in
particular the components of income, demand for space and rental
rates are, to a large extent, determined by local and national
market conditions.
The General Partners conduct an in-depth assessment of each
property's physical condition as well as a demographic analysis to
assess opportunities for increasing occupancy and rental rates and
decreasing operating costs. In all instances, decisions concerning
restructuring of loan terms, reversions and subsequent operation of
the property are made with the intent of maximizing the potential
proceeds to the Partnership and, therefore, return of investment
and income to Limited Partners.
In certain instances and under limited circumstances,
management of the Partnership entered into negotiations with
lenders for the purpose of restructuring the terms of loans to
provide for debt service levels that could be supported by
operations of the properties. 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 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 Operations for the period from January 1,1999 to July
12, 1999 and the year ended December 31,1998
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.
Prior to the adoption of the liquidation basis of accounting,
the Partnership recorded rental income 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. Upon adoption of the liquidation basis of accounting,
the Partnership wrote off the remaining deferred rent receivable
and ceased recording credits or charges to rental income to reflect
straight lining of the related leases.
Additionally, 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.
Results of Operation - 1998 Compared to 1997
(Amounts rounded to nearest 000's)
The Partnership generated net income of $241,000 for the year
ended December 31, 1998 as compared to net income of $391,000 for
the same period in 1997. The $150,000 decrease in net income
resulted primarily from a $188,000 decrease in total income.
Total income for the year ended December 31, 1998 was
$2,214,000 as compared to $2,402,000 for the same period in 1997,
a decrease of $188,000. The $188,000 decrease resulted primarily
from an decrease in rental income at Shoppes due to a decrease in
the occupancy to 92% in 1998 from 95% in 1997 and a decrease in
percentage rental income caused by lower sales of several tenants.
Total expenses incurred in 1998 were $1,973,000 as compared to
$2,011,000 in 1997, a decrease of $38,000. The decrease of $38,000
was due primarily to a $17,000 decrease in real estate taxes in
1998 when compared to the same period in 1997. The $17,000
decrease in real estate taxes is primarily attributable to the
Shoppes property. Also contributing to the decrease in expenses is
a $13,000 decrease in general and administrative expenses, which
was due primarily to a $54,000 decrease in insurance expenses at
Shoppes. The decrease of $54,000 in insurance expenses at Shoppes
was partially offset by an increase of $23,000 in professional
services, which primarily relates to the property appraisals that
were undertaken in 1998.
Item 7. Consolidated Financial Statements and Supplementary Data.
See Index to Consolidated Financial Statements on Page F-1 of
this Form 10-KSB for consolidated 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
None.
<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
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. Thomas E. Murphy . . . . . . . . . . . . . . . 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 66) chairman of the board of
directors, president and chief executive officer of the Corporate
General Partner, as well as a principal shareholder of the
Corporate General Partner. He is a member and manager of Brauvin
Real Estate Funds, L.L.C. He is a member of Brauvin Capital Trust
L.L.C. Since 1979, he has been a shareholder, president and a
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 four other 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., Illinois companies engaged in the real estate and
securities businesses. He is a director, president and chief
executive officer of Brauvin Net Lease V, Inc. He is the chief
executive officer of Brauvin Capital Trust, Inc. Mr. Brault
received a B.S. in Business from DePaul University, Chicago,
Illinois in 1959.
MR. JAMES L. BRAULT (age 39) is a vice president and secretary
and is responsible for the overall operations of the Corporate
General Partner and other affiliates of the Corporate General
Partner. He is an officer of various Brauvin entities which act as
the general partners of four other publicly registered real estate
programs. Mr. Brault is executive vice president and assistant
secretary and is responsible for the overall operations of Brauvin
Management Company. He is also an executive vice president and
secretary of Brauvin Net Lease V, Inc. He is a manager of Brauvin
Real Estate Funds, L.L.C., Brauvin Capital Trust, L.L.C. and
BA/Brauvin L.L.C. He is the president of Brauvin Capital Trust,
Inc. 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 origination and management of
commercial real estate loans, as well as the direct 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. THOMAS E. MURPHY (age 33) is the treasurer and chief
financial officer of the Corporate General Partner and other
affiliates of the Corporate General Partner. He is the chief
financial officer of various Brauvin entities which act as the
general partners of four other publicly registered real estate
programs. Mr. Murphy is also the chief financial officer of
Brauvin Associates, Inc., Brauvin Management Company, Brauvin
Financial, Inc., Brauvin Securities, Inc. and Brauvin Net Lease V,
Inc. He is the treasurer, chief financial officer and secretary of
Brauvin Capital Trust, Inc. He is responsible for the Partnership's
accounting and financial reporting to regulatory agencies. He
joined the Brauvin organization in July 1994. Prior to joining the
Brauvin organization he was in the accounting department of
Zell/Merrill Lynch and First Capital Real Estate Funds where he was
responsible for the preparation of the accounting and financial
reporting for several real estate limited partnerships and
corporations. Mr. Murphy received a B.S. in Accounting from
Northern Illinois University in 1988. Mr. Murphy is a Certified
Public Accountant and is a member of the Illinois Certified Public
Accountants Society.
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 3 and 5 of the Notes to
Consolidated Financial Statements filed with this annual report for
a description of such distributions and allocations.
The General Partners received a share of Partnership income for
1999 and 1998.
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 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,
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 resigned as an individual general partner of the
Partnership effective 90 days after August 14, 1997 but remains a
shareholder of the Corporate General Partner. He is 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 5 of the Notes to Consolidated 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 in 1995 to an 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 consolidated financial statements of the Partnership.
As a precondition to the new financing on Delchamps, the lender
required that ownership of the property reside in an SPE. To
accommodate the lender's requirements, ownership of the property
was transferred in 1997 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.
(c) No management persons are indebted to the Partnership.
(d) There have been no transactions with promoters.
<PAGE>
Item 13. Exhibits, Consolidated Financial Statements and Reports
on Form 8-K.
(a) The following documents are filed as part of this report:
(1) (2) Consolidated Financial Statements (See Index to
Consolidated 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
21. Subsidiaries of the registrant
27. Financial Data Schedule
*28 Pages 9-14 and A-15 to A-18 of
the Partnership's Prospectus and
the Agreement dated May 30, 1986,
as supplemented.
* Incorporated by reference from the exhibits filed with the
Partnership's registration statement (File No. 0-16857) on Form
S-11 filed under the Securities Act of 1933:
(b) No portions of the annual report have been incorporated by
reference in this Form 10-KSB.
(c) Form 8-K.
None.
(d) An annual report for the fiscal year 1999 will be sent to
the Limited Partners subsequent to this filing.
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/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer and
Treasurer
INDIVIDUAL GENERAL PARTNER
/s/ Jerome J. Brault
Jerome J. Brault
Dated: March 30, 2000
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report . . . . . . . . . . . . . . . F-2
Consolidated Statement of Net Assets in Liquidation
as of December 31, 1999 (Liquidation Basis) . . . . . . . F-3
Consolidated Statement of Changes in Net Assets
in Liquidation for the period July 12, 1999 to
December 31, 1999 (Liquidation Basis ) . . . . . . . . . F-4
Consolidated Statements of Operations for the period
July 13, 1999 to December 31, 1999 (Liquidation Basis),
January 1, 1999 to July 12, 1999 (Going Concern Basis)
and the year ended December 31, 1998
(Going Concern Basis) . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Partners' Capital, for
the period January 1, 1999 to July 12, 1999 and the
year ended December 31, 1998 (Going Concern Basis) . . . . F-6
Consolidated Statements of Cash Flows for the year ended
December 31, 1998 (Going Concern Basis) . . . . . . . . . . F-7
Notes to Consolidated 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 financial statements as of
December 31, 1999, and for the years ended December 31, 1999 and
1998 as listed in the index to consolidated financial statements.
These consolidated financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Brauvin
Income Properties L.P. 6 at December 31, 1999, and the results of
their operations for the years ended December 31, 1999 and 1998 and
their cash flows for the year ended December 31, 1998 in conformity
with generally accepted accounting principles.
As discussed in Notes 1 and 2 to the consolidated financial
statements, on July 12, 1999 the Partnership received approval by
the Partners to sell substantially all of its assets. As a result,
the Partnership changed its basis of accounting from the going
concern basis to the liquidation basis.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 16, 2000
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF
DECEMBER 31, 1999
ASSETS
Real estate held for sale $16,958,250
Cash and cash equivalents 687,830
Rent receivable
allowances of $46,247) 65,133
Escrow and other deposits 655,384
Other assets 19,322
Total Assets 18,385,919
LIABILITIES
Mortgage notes payable (Note 4) 8,594,600
Accounts payable and accrued
expenses 205,731
Deferred gain on sale of property (Note 2) 7,479,029
Reserve for liquidation costs (Note 2) 151,870
Due to affiliate 10,195
Tenant security deposits 13,549
Total Liabilities 16,454,974
Net Assets in Liquidation $ 1,930,945
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS) FOR THE PERIOD
JULY 12, 1999 TO DECEMBER 31, 1999
Net assets at July 12, 1999
(Going Concern Basis) $2,323,288
Income from operations 160,823
Distributions to Limited Partners (a) (274,453)
Adjustment to liquidation basis (278,713)
Net assets in liquidation at December 31, 1999 $1,930,945
(a) Distributions to Limited Partners were approximately $35.00 per
Unit.
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Liquidation (Going Concern (Going
Basis) Basis) Concern Basis)
July 13, 1999 January 1, For the
to 1999 to year ended
December 31,1999 July 12,1999 December 31,1998
INCOME
Rental $ 736,964 $1,061,922 $ 1,772,670
Interest 21,095 19,438 53,886
Other, primarily expense
reimbursements 57,960 236,479 387,066
Total income 816,019 1,317,839 2,213,622
EXPENSES
Interest 338,595 498,998 864,778
Depreciation -- 207,466 360,779
Real estate taxes 54,275 66,613 114,194
Repairs and maintenance 13,261 14,780 22,193
Management fees (Note 5) 53,665 86,262 145,418
Other property operating 83,562 91,606 192,116
General and administrative 111,838 132,554 272,971
Total expenses 655,196 1,098,279 1,972,449
Income before adjustment
to liquidation basis 160,823 219,560 241,173
Adjustment to liquidation
basis (278,713) - --
Net (loss) income $(117,890) $ 219,560 $ 241,173
Net (loss) income allocated to:
General Partners $ (1,179) $ 2,196 $ 2,412
Limited Partners $(116,711) $ 217,364 $ 238,761
Net (loss) income Per Limited
Partnership Interest
(7,842.5 Units) $ (14.88) $ 27.72 $ 30.44
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the period January 1, 1999 to July 12, 1999
and the year ended December 31, 1998
General Limited
Partners Partners* Total
Balance, January 1, 1998 $ 13,716 $2,670,170 $2,683,886
Net income 2,412 238,761 241,173
Cash distributions -- (548,380) (548,380)
Balance, December 31, 1998 16,128 2,360,551 2,376,679
Net income 2,196 217,364 219,560
Cash distributions -- (272,951) (272,951)
Balance, July 12, 1999 $18,324 $2,304,964 $2,323,288
* Total Units outstanding at July 12, 1999 and December 31, 1998
were 7,842.50. Cash distributions to Limited Partners per Unit
were approximately $34.80 and $69.92, respectively, for the period
January 1, 1999 to July 12, 1999 and for the year ended December
31, 1998.
In connection with the July 12, 1999 authorization of the Limited
Partners to sell the Partnership's assets, the Partnership adopted
the liquidation basis of accounting as explained in Notes 1 and 2.
The presentation format used in 1998 is, therefore, no longer
applicable. The effect of the change in adopting the liquidation
basis is reflected in the Consolidated Statement of Changes in Net
Assets in Liquidation.
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31, 1998
Cash Flows From Operating Activities:
Net income $241,173
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 360,779
Provision for doubtful accounts 24,222
Changes in:
Rent receivable 70,002
Escrow and other deposits (41,300)
Other assets 38,869
Accounts payable and accrued expenses 23,374
Due to affiliate (1,661)
Net cash provided by operating activities 715,458
Cash Flows From Investing Activities:
Capital expenditures (30,229)
Cash used in investing activities (30,229)
Cash Flows From Financing Activities:
Repayment of mortgage notes payable (110,588)
Cash distributions to Limited Partners (548,380)
Net cash used in financing activities (658,968)
Net increase in cash and cash equivalents 26,261
Cash and cash equivalents at
beginning of year 749,946
Cash and cash equivalents at end of year $ 776,207
Supplemental disclosure of cash flow information:
Cash paid for mortgage interest $ 826,784
See accompanying notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
(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").
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 December 31, 1999.
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 SPE 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 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 December 31, 1999.
(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 is 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) $7,479,029
Write-off of deferred rent receivable (25,878)
Write-off of mortgage costs (100,965)
Increase in deferred gain on sale
of real estate (7,479,029)
Estimated liquidation costs (151,870)
Total adjustment to liquidation basis $ (278,713)
(a) Net of estimated closing costs.
(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. The Preferential Distribution Deficiency equaled
$4,208,073 after this distribution.
(4) MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1999, consisted of the
following:
Interest Date
1999 Rate Due
Shoppes on the Parkway(a) $5,759,289 9.55% 5/01/02
Delchamps Plaza
North Shopping Center(b) 2,835,311 9.03% 2/01/02
$8,594,600
The net carrying value of the Delchamps property and the
Shoppes property approximated $4,759,000 and $10,999,000,
respectively, at December 31, 1999. Delchamps and Shoppes serve as
collateral under the respective nonrecourse debt obligations.
Maturities of the mortgage notes payable are as follows:
2000 $ 132,707
2001 146,554
2002 8,315,339
$8,594,600
(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.
(5) TRANSACTIONS WITH AFFILIATES
Fees and other expenses paid or payable to the General Partners
or their affiliates for the years ended December 31, 1999 and 1998
were as follows:
1999 1998
Management fees $139,927 $145,418
Reimbursable office expenses 133,114 154,500
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 $10,195 for management fees, as
of December 31, 1999.
(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:
For the years ended December 31,:
2000 $1,496,315
2001 1,249,998
2002 860,378
2003 591,062
2004 447,367
Thereafter 835,856
Total $5,480,976
Contingent rental income approximated $37,000 and $33,000 in
1999 and 1998, 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
approximates 18% of rental income for the Partnership for both
years ended December 31, 1999 and 1998. Rental income received
from Ponderosa approximates 7.3% and 7.2% of rental income for the
Partnership for the years ended December 31, 1999 and 1998,
respectively.
<PAGE>
EXHIBIT INDEX
Exhibit (21) Subsidiaries of the Registrant
Exhibit (27) Financial Data Schedule
<PAGE>
Exhibit 21
Name of Subsidiary State of Formation
Brauvin/Shoppes on the Parkway L.P. Delaware
Brauvin/Delchamps L.P. Delaware
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 687,830
<SECURITIES> 0
<RECEIVABLES> 65,133
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 16,958,250 <F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,385,919
<CURRENT-LIABILITIES> 0
<BONDS> 8,594,600 <F2>
0
0
<COMMON> 0 <F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 2,133,858 <F4>
<CGS> 0
<TOTAL-COSTS> 915,882 <F5>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 837,593
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (278,713)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,670
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND
BUILDING]
<F2> "BONDS" REPRESENTS MORTGAGES PAYABLE
<F3> "COMMON" REPRESENTS TOTAL PARTNERS CAPITAL
<F4> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F5> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES LESS INTEREST
</FN>
</TABLE>
