SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 3, 1994
Vanguard Real Estate Fund I, A Sales-Commission-Free Income Properties Fund
(Exact name of the registrant as specified in its charter)
Massachusetts 0-16785 23-6861048
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Vanguard Financial Center, Malvern, 19355
(Address of principal executive offices) (Zip Code)
Registrant s telephone number, including area code (610) 669-1000
<PAGE>
INDEX
Cover Page . . . . . . . . . . . . . . . . . . . . . . -
Index. . . . . . . . . . . . . . . . . . . . . . . . . 1
Item
No.
Item 1. Change in Control of Registrant . . . . . . . 2
Item 2. Acquisition or Disposition of Assets . . . . . 2
Item 3. Bankruptcy or Receivership . . . . . . . . . . 2
Item 4. Changes in Registrant's Certifying Accountant. 2
Item 5. Other Events . . . . . . . . . . . . . . . . . 2
Item 6. Resignation of Registrant's Directors. . . . . 2
Item 7. Financial Statements and Exhibits
Pro Forma Statement of Operations, year ended
December 31, 1993 . . . . . . . . . . . . . . .3
Notes to Pro Forma Statement of Operations, year
ended December 31, 1993 . . . . . . . . . . . .4
Pro Forma Statement of Operations, six-months ended
June 30, 1994 . . . . . . . . . . . . . . . . .5
Notes to Pro Forma Statement of Operations, six-months
ended June 30, 1994 . . . . . . . . . . . . . .6
Pro Forma Balance Sheet at June 30, 1994 . . . .7
Notes to pro forma Balance Sheet at June 30,
1994. . . . . . . . . . . . . . . . . . . . . .8
Item 8. Change in Fiscal Year . . . . . . . . . . . . .2
Signatures . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
Item 1. Change in Control of Registrant
None
Item 2. Acquisition or Disposition of Assets
On October 3, 1994, Vanguard Real Estate Fund I (the Fund ) sold the
Seattle Industrial Portfolio ("Seattle") for $31,850,000 to Spieker
Properties, Inc. Seattle was purchased in January 1988 for $21,800,000.
In accordance with the terms of the advisory agreement between the Fund
and Aldrich, Eastman and Waltch ("AEW"), in 1988 the Fund paid an
acquisition fee of $436,000, representing 2% of the purchase price, and
in the fourth quarter of 1994 will pay a disposition fee of approximately
$614,000, representing 2% of the net proceeds, in connection with the
sale of the Seattle Portfolio. The Fund also, at closing, paid a sales
incentive fee of $520,000 to Seattle's property manager. The Seattle
property manager is a wholly-owned subsidiary of the purchaser. The Fund
expects to recognize a gain of approximately $9,250,000 in the fourth
quarter of 1994 on the sale of Seattle.
Item 3. Bankruptcy or Receivership
None
Item 4. Changes in Registrant's Certifying Accountant
None
Item 5. Other Events
None
Item 6. Resignation of Registrant's Directors
None
Item 7. Financial Statements and Exhibits
Unaudited pro forma statements of operations for the year ended December
31, 1993 and for the six-months ended June 30, 1994, respectively, and an
unaudited pro forma balance sheet at June 30, 1994, are filed as part of
this report.
Item 8. Change in Fiscal Year
None
2
<PAGE>
The following unaudited pro forma statement of operations presents the results
of operations of Vanguard Real Estate Fund I ("VREF I") for the year ended
December 31, 1993, as if the October 3, 1994 disposition of the Seattle
Industrials Portfolio ("Seattle"), the August 17, 1994 disposition of the Arden
Hills building ("Arden Hills") and the 1993 dispositions of Carmel Office
Park ("Carmel") and VREF I's Citadel II investment ("Citadel II") each
occurred on January 1, 1993. Such pro forma information is based upon (i)
the pro forma results of operations of VREF I for the year ended December 31,
1993, giving effect to the dispositions of Arden Hills, Carmel and Citadel II
as if such dispositions had occurred on January 1, 1993, as previously
reported in VREF I's current report on Form 8-K dated August 17, 1994 and (ii)
the historical results of operations for Seattle for the year ended December
31, 1993, giving effect to the pro forma adjustments relating only to those
items which will have a continuing impact on the Fund's Statement of Operations
described below. This statement does not purport to be indicative of results
of operations that actually would have resulted if VREF I had disposed of
Seattle, Arden Hills, Carmel, and Citadel II on January 1, 1993. This statement
should be read in conjunction with the financial statements of VREF I included
in its 1993 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and
the pro forma financial statements included in VREF I's Current Report on Form
8-K dated August 17, 1994.
VANGUARD REAL ESTATE FUND I,
A SALES-COMMISSION-FREE INCOME PROPERTIES FUND
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993 (5)
(Unaudited)
Pro Forma Results as
Previously Reported Pro Forma
in Form 8-K dated Adjustments Pro Forma
August 17, 1994 Seattle Results
(000) (000) (000)
REAL ESTATE INCOME
Rental Income $5,336 $(3,722)(1) 1,614
Mortgage Interest Income 1,279 - 1,279
Net Income from In-Substance
Foreclosed Assets 1,584 - 1,584
------ ------- -----
8,199 (3,722) 4,477
REAL ESTATE EXPENSES
Mortgage Interest Expense 252 - 252
Real Estate Taxes 419 (240)(1) 179
Property Operating Expenses 568 (310)(1) 258
Depreciation and Amortization 911 (472)(1) 439
Provision for Possible Losses 2,500 - 2,500
------ ------- -----
4,650 (1,022) 3,628
INCOME FROM REAL ESTATE 3,549 (2,700) 849
INVESTMENT INCOME FROM
SHORT-TERM INVESTMENTS 198 - (2) 198
----- ------- -----
3,747 (2,700) 1,047
ADMINISTRATIVE EXPENSES
Investment Advisory Fee 326 (135)(3) 191
Administrative Fee 278 (122)(4) 156
Other Administrative Expenses 357 - 357
----- -------- -----
961 (257) 704
NET INCOME $2,786 $(2,443) $343
Weighted Average Shares
Outstanding 11,039,590 11,039,590
Net Income per Share $0.25 $0.03
The accompanying notes are an integral part of this statement.
3
<PAGE>
NOTES TO PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(1) To record decreases in rental income, real estate taxes, property operating
expenses, and depreciation and amortization based on the historical
operating results of Seattle included in VREF I's historical results of
operations for the year ended December 31, 1993.
(2) The Fund currently anticipates that the net proceeds of the Seattle
transaction will be paid out with its year-end 1994 distribution to
shareholders. For purposes of pro forma presentation of the Fund s
operating results for the year ended December 31, 1993, Fund management has
assumed that the net proceeds made available from the Seattle transaction
was immediately distributed to shareholders on January 1, 1993, and,
accordingly, no investment earnings have been imputed on the Seattle net
proceeds.
(3) To record a decrease in the investment advisory fee based upon the decrease
in real estate assets held by the Fund.
(4) To record a decrease in the administrative fee based upon the decrease in
assets held by the Fund.
(5) The estimated $9,250,000 gain on the sale of Seattle has not been included
in the pro forma statement of operations for the year ended December 31,
1993 since such gain is a nonrecurring gain after income from continuing
operations.
Pursuant to the Fund's prospectus, the Fund may not reinvest the net
proceeds received from sales in additional real estate investments after
December 31, 1993. If cash available for investment , giving effect to
Seattle, Arden Hills and Carmel as if they had been disposed of on January
1, 1993, was assumed to have been invested in short-term money market
instruments (it is, in the opinion of the Fund's management, impracticable
to assume that a suitable real estate investment consistent with the Fund's
investment objectives would have been identified for the investment of such
available cash) and not assumed to have been distributed on January 1,
1993, the Fund would have earned approximately $1,471,000 in short-term
investment income, using an average interest rate of 3.0%, on a pro forma
basis for the year ended December 31, 1993, resulting in investment income
from short-term investments of $1,669,000.
4
<PAGE>
The following unaudited pro forma statement of operations presents the results
of operations of Vanguard Real Estate Fund I ("VREF I") for the six months ended
June 30, 1994, as if the October 3, 1994 disposition of the Seattle Industrials
Portfolio ("Seattle"), the August 17, 1994 disposition of the Arden Hills
building ("Arden Hills") and the 1993 dispositions of Carmel Office Park
("Carmel") and VREF I's Citadel II investment ("Citadel") each occurred on
January 1, 1993. Such pro forma information is based upon (i) the pro forma
results of operations of VREF I for the six months ended June 30, 1994, giving
effect to the dispositions of Arden Hills, Carmel and Citadel II as if such
dispositions had occurred on January 1, 1993, as previously reported in VREF I's
current report on Form 8-K dated August 17, 1994 and (ii) the historical results
of operations for Seattle for the year ended December 31, 1993, giving effect
to the pro forma adjustments relating only to those items which will have a
continuing impact on the Fund's Statement of Operations described below.
This statement does not purport to be indicative of results of operations
that actually would have resulted if VREF I had disposed of Seattle, Arden
Hills, Carmel, and Citadel II on January 1, 1993. This statement should be
read in conjunction with the financial statements of VREF I included in its
1993 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, and the pro
forma financial statements included in VREF I's Current Report on Form 8-K dated
August 17, 1994.
VANGUARD REAL ESTATE FUND I,
A SALES-COMMISSION-FREE INCOME PROPERTIES FUND
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX-MONTHS ENDED JUNE 30, 1994 (5)
(Unaudited)
Pro Forma Results as
Previously Reported Pro Forma
in Form 8-K dated Adjustments Pro Forma
August 17, 1994 Seattle Results
(000) (000) (000)
REAL ESTATE INCOME
Rental Income $3,165 $(1,874)(1) $1,291
Mortgage Interest Income 521 - 521
Net Income from In-Substance
Foreclosed Assets 341 - 341
------ -------- -----
4,027 (1,874) 2,153
REAL ESTATE EXPENSES
Mortgage Interest Expense 123 - 123
Real Estate Taxes 261 (125)(1) 136
Property Operating Expenses 470 (149)(1) 321
Depreciation and Amortization 517 (239)(1) 278
Provision for Possible
Losses/(Charge Offs) (290) - (290)
------ -------- -----
1,081 (513) 568
INCOME FROM REAL ESTATE 2,946 (1,361) 1,585
INVESTMENT INCOME FROM
SHORT-TERM INVESTMENTS 157 - (2) 157
------ -------- ------
3,103 (1,361) 1,742
ADMINISTRATIVE EXPENSES
Investment Advisory Fee 159 (68)(3) 91
Administrative Fee 137 (61)(4) 76
Other Administrative Expenses 163 - 163
------ -------- -----
459 (129) 330
NET INCOME $2,644 $(1,232) $1,412
====== ======== ======
Weighted Average Shares
Outstanding 11,019,978 11,019,978
========= ==========
Net Income per Share $0.24 $0.13
The accompanying notes are an integral part of this statement.
5
<PAGE>
NOTES TO PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX-MONTHS ENDED JUNE 30, 1994
(1) To record decreases in rental income, real estate taxes, property operating
expenses, and depreciation and amortization based on the historical
operating results of Seattle included in VREF I's historical results of
operations for the six-months ended June 30, 1994.
(2) The Fund currently anticipates that the net proceeds of the Seattle
transaction will be paid out with its year-end 1994 distribution to
shareholders. For purposes of pro forma presentation of the Fund's
operating results for the six-months ended June 30, 1994, Fund
management has assumed that the net proceeds made available from this
transaction were immediately distributed to shareholders on January 1,
1993, and, accordingly, no investment earnings have been imputed on the
Seattle net proceeds.
(3) To record a decrease in the investment advisory fee based upon the decrease
in real estate assets held by the Fund.
(4) To record a decrease in the administrative fee based upon a decrease in
assets, resulting from the assumed January 1, 1993 distribution to
shareholders of the net proceeds of the Seattle transaction, held by the
Fund.
(5) Pursuant to the Fund s prospectus, the Fund may not reinvest the net
proceeds received from sales in additional real estate investments after
December 31, 1993. If cash available for investment, giving effect to
Seattle and Arden Hills as if they had been disposed of on January 1, 1993,
were assumed to have been invested in short-term money market instruments
for the first six months of 1994, and not assumed to have been distributed
on January 1, 1993, the Fund would have earned approximately $534,000 in
short-term investment income, using an average interest rate of 3.0%, on a
pro forma basis for the six-months ended June 30, 1994, resulting in
investment income from short-term investments of $691,000.
6
<PAGE>
The following unaudited pro forma balance sheet presents the financial position
of Vanguard Real Estate Fund I ("VREF I") as of June 30, 1994 as if the
disposition of the Seattle Industrial Portfolio ("Seattle") and the August 17,
1994 disposition of VREF I's Arden Hills building had occurred as of June 30,
1994. Such pro forma information is based upon (i) the pro forma balance sheet
of VREF I as of June 30, 1994, giving effect to the sale of Arden Hills as if
such sale had occurred on June 30, 1994, as previously reported in VREF I's
current report on Form 8-K dated August 17, 1994 and (ii) the historical balance
sheet data of Seattle as of that date, giving effect to the pro forma
adjustments described below. This pro forma financial information should be
read in conjunction with the financial statements of VREF I included in its 1993
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and the pro forma
financial information included in VREF I's Current Report on Form 8-K dated
August 17, 1994.
VANGUARD REAL ESTATE FUND I,
A SALES-COMMISSION-FREE INCOME PROPERTIES FUND
PRO FORMA BALANCE SHEET
JUNE 30, 1994
(Unaudited)
Pro Forma Balance
Sheet as Previously
Reported in Form Pro Forma
8-K dated Adjustments Pro Forma
August 17, 1994 Seattle Results
(000) (000) (000)
ASSETS
Investments in Real Estate:
Direct Ownership Investments:
Land $14,896 $ (8,250)(1) $6,646
Building and Improvements 36,201 (14,844)(1) 21,357
------- --------- ------
51,097 (23,094) 28,003
Less - Accumulated Depre-
ciation 4,197 (2,439)(1) 1,758
------- -------- ------
46,900 (20,655) 26,245
Mortgage Loans Receivable 10,646 - 10,646
------- -------- ------
Net Investment Portfolio 57,546 (20,655) 36,891
Short - Term Investments:
Marketable Securities - REMICs 2,202 - 2,202
Vanguard Money Market Reserves
- Prime Portfolio 7,416 30,664 (2) 38,080
Temporary Cash Investments 7,496 - 7,496
Other Assets 1,181 (284)(1) 897
------- ------- ------
TOTAL ASSETS $75,841 $ 9,725 $85,566
======= ======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage Loan $ 2,431 - $2,431
Due to Affiliates 272 614 (3) 886
Dividends Payable 1,653 - 1,653
Other Liabilities 423 (135)(1) 288
------- ------- ------
TOTAL LIABILITIES 4,779 479 5,258
Shares of Beneficial Interest,
without par value,
unlimited shares authorized 80,608 - 80,608
Accumulated Distributions in
Excess of Net Income (9,546) 9,246(4) (300)
------- ------- ------
TOTAL SHAREHOLDERS' EQUITY 71,062 9,246 80,308
------- ------- ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $75,841 $ 9,725 $85,566
======= ======== =======
The accompanying notes are an integral part of this statement.
7
<PAGE>
NOTES TO JUNE 30, 1994 PRO FORMA BALANCE SHEET
(1)To record the reduction in land, building and improvements, accumulated
depreciation, other assets and other liabilities based on the historical
financial position of Seattle included in VREF I's historical balance sheet
at June 30, 1994.
(2)To record the increase in short-term investments resulting from the
investment of the estimated net proceeds, prior to the 2% disposition fee due
the Fund's Adviser, of the Seattle disposition. The Fund currently
anticipates that the net proceeds of the Seattle transaction will be paid out
with its year-end 1994 distribution to shareholders.
(3) To record the 2% disposition fee due the Fund's Adviser.
(4) To record the estimated gain on the disposition of Seattle.
8
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VANGUARD REAL ESTATE FUND I
A SALES-COMMISSION-FREE INCOME PROPERTIES FUND
DATE: ______________ BY: _______________________________
Ralph K. Packard
Vice President & Controller
9
