Item 1. Business
The registrant, Griffin Real Estate Fund-VI, A Limited Partnership (the "Partnership"), was organized on November 22, 1985 under the laws of the State of Minnesota and became effective on May 27, 1986. The Partnership was formed by the general partners, Griffin Equity Partners, a Minnesota partnership, and Guardian Investment Corporation, a Minnesota corporation, to acquire existing, income-producing real properties for rental purposes. On March 19, 1986 the Partnership commenced an offering of $15,000,000 pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. The offering terminated March 19, 1988 upon the acceptance of 19,053 units ($9,526,500).
The Partnership was engaged solely in the business of real estate investment. A presentation of information about industry segments is not applicable and would not be material to an understanding of the Partnership's business taken as a whole.
The Terms of Transactions between the Partnership and affiliates of the General Partner are described in Item 11 to which reference is hereby made.
Item 2.
Item 2. Properties
As of December 31, 1996 the Partnership has sold all of its real property investments and has been terminated effective that date.
Item 3.
Item 3. Legal Proceedings
There have been no significant legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Limited Partners
There were no matters submitted to a vote of the Limited Partners.
PART II
Item 5.
Item 5. Market for the Partnership's Limited Partnership Interests and Related Limited Partner Matters
There are approximately 988 holders of record of units of the Partnership. There is no public market for units and it is not anticipated that a public market for units will develop. The General Partner will not redeem or repurchase units except upon death of the original limited partner.
Reference is made to Item 6
Item 6. Selected Financial Data
(a) The above selected financial data should be read in conjunction with the financial statements and the related notes appearing in Exhibit 13 in this annual report.
(b) Cash distributions of $146 per limited Partnership unit have been made to the Limited Partners since the inception of the Partnership. These distributions have not resulted in taxable income to such Limited Partners and have therefore represented a return of capital. Each Partner's taxable income (or loss) from the Partnership in each year is equal to his allocable share of the taxable income (loss) of the Partnership, without regard to cash generated or distributed by the Partnership. In the opinion of counsel, the Partnership's Income and Tax Losses (including net income and losses from operations but not interest income earned on cash reserves and investments) as well as Profit or Loss on the Sale of Properties will constitute passive activity income and losses under the 1986 Act with respect to those taxpayers to which the passive activity rules apply.
(c) The net income (loss) and cash distributions per limited partnership unit are based upon the weighted average number of limited partnership units outstanding during the period.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
RESULTS OF OPERATIONS
Because all of the Partnership properties were sold at different dates during 1996, a discussion of the 1996 results from operations compared to prior years would not be practical and therefore is not included.
As planned the Partnership completed the sale of all of its properties and concluded its operations at December 31, 1996, with the exception of the final liquidating distribution of $9.27 per limited partnership unit which was issued on January 22, 1997.
Following the formation of the Partnership it acquired four properties, Hidden Glen Apartments in Atlanta, GA, Carriage House Apartments in Jacksonville, FL, Bass Lake Building and Industry Park Building both in New Hope, MN. Hidden Glen was acquired on February 20, 1987, and was lost to foreclosure by the lender on December 3, 1991. Carriage House Apartments was acquired on December 29, 1987 and was sold for all cash on May 10, 1996 for $3,005,300. With the sale the mortgage debt of $2,363,147 was extinguished after approximately $307,600 of sale expenses and the approximate $334,600 of sales proceeds was distributed at $18.00 per limited partnership unit on June 19, 1996. Bass Lake Building was acquired on May 18, 1988 and was sold for all cash on September 30, 1996 for $1,425,000. With the sale, the mortgage debt of $1,004,357 was extinguished after approximately $43,100 of sales expenses and approximately $32,900 of prepayment penalties. The approximate $344,600 of sales proceeds was distributed at $18.00 per limited partnership unit on October 25, 1996. Industry Park Building was acquired on May 18, 1988 and was sold for all cash on November 15, 1996 at a price of $1,590,000. With the sale, the mortgage debt of $765,237 was extinguished after approximately $56,700 of sales expenses. The approximate $768,000 of sales proceeds was distributed at $40.00 per limited partnership unit.
Due to a valuation provision $509,000 recognized in 1992, the combined sales resulted in $355,395 of gain from sale and $294,640 of net income for the Partnership for the year ended December 31, 1996. However, because the valuation provision was not recognized for tax purposes the property sales did not result in any taxable income in 1996.
Summary of Operations - 1995 Compared to 1994
Rental rates increased by 2% at Carriage House Apartments and approximately 8% for new leases during 1995 at Bass Lake Building and Industry Park Building. Average physical occupancy increased at Carriage House Apartments by 2% from an average of 89% to an average of 91%. Occupancy at Bass Lake decreased from 95.8% to 91.5%. Occupancy at Industry Park declined from an average of 95.5% to an average of 87.8%. However, as of March 1, 1996 both Bass Lake Building and Industry Park Building are at 100% occupancy, while Carriage House Apartments occupancy has declined to 87.7%.
The common area reimbursement increase of approximately $37,000 was a result of higher charges to tenants to off-set increased operating expenses of the two industrial properties.
Total revenue increased by approximately $75,000 while operating expenses (excluding property valuation benefit) decreased by approximately $15,600 resulting in an approximate $90,600 increase in Net Income. Included in the decreased expenses were insurance expense which decreased approximately $27,500 and bad debt expense which increased approximately $23,600.
The decrease in insurance expense was due to lower premiums as a result of changing insurance carriers for the two industrial properties. The decrease was also due to the elimination of the costly separate coverage for wind and storm damages for Carriage House Apartments (located in Florida) which was included as a part of the primary insurance package in 1995.
The bad debt expense increased by approximately $23,600 essentially due to writing off approximately $21,500 of rent due from a tenant who pre-maturely vacated its space and subsequently filed bankruptcy.
Due to the tax reform act of 1986, the over-built real estate situation, the Savings and Loan Industry crisis, and the recessionary climate in the United States, real estate values in general declined substantially in the later 1980's and early 1990's. Experts believed that this decline reached bottom in 1992. Generally accepted accounting principals require that property be carried on the Partnership books at the lower of depreciated cost or market value. Because of further declines in value of the Partnership property, the Partnership increased the valuation allowance by $88,000 for Bass Lake and Industry Park commercial properties in 1993. In 1995 and 1994, however, a recovery of market values allowed the Partnership to restore the valuation allowance by $75,000 and $52,000 respectively.
The Carriage House Apartments mortgage lender has agreed to a short term extension of the maturity date of the loan from December 29, 1995 to June 28, 1996. The interest rate and monthly debt service payment during the extension will remain the same.
Liquidity
No discussion of liquidity is provided as the partnership was liquidated and ceased operations effective December 31, 1996.
OCCUPANCY TABLE
Approximate occupancy levels of the Partnership's investment property by quarter.
Carriage House Bass Lake Road Industry Park Apartments New Hope, MN New Hope, MN Jacksonville, FL ------------ ------------ ----------------
3/31/96 100% 98% 85% 6/30/96 100% 99% * 9/30/96 * 99% * 12/31/96 * * *
3/31/95 100% 85% 90% 6/30/95 100% 85% 88% 9/30/95 83% 85% 96% 12/31/95 83% 97% 91%
3/31/94 94% 98% 87% 6/30/94 100% 97% 90% 9/30/94 100% 96% 93% 12/31/94 89% 91% 86%
3/31/93 82% 62% 93% 6/30/93 82% 81% 92% 9/30/93 82% 98% 91% 12/31/93 82% 98% 91%
3/31/92 72% 96% 90% 6/30/92 91% 85% 88% 9/30/92 84% 80% 95% 12/31/92 86% 96% 94%
* Indicates the Partnership did not own this property at the end of the quarter.
Item 8.
Item 8. Financial Statements and Supplementary Data
The Table of Contents to Financial Statements, Financial Statements and Supplementary Data listed in Item 14 are referenced herein as included in the exhibits attached to this report and are incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no changes in independent auditors and as of the date of the filing, there were no material disagreements with the current independent auditors (Larson, Allen, Weishair & Co.,LLP) regarding any of the following:
1) Accounting principles or practices 2) Extent and quality of financial statement disclosure 3) Auditing scope or procedures
PART III
Item 10.
Item 10. The General Partner of the Partnership
The Partnership was terminated effective December 31, 1996. Before then, the General Partners of the Partnership were Griffin Equity Partners, a Minnesota general partnership formed in October of 1984 by the owners of Griffin Companies to act, along with Guardian Investment Corporation, a Minnesota corporation and a wholly owned subsidiary of Griffin Companies ("General Partner"), as General Partner for various limited partnerships sponsored by Griffin Companies. As General Partner, Griffin Equity Partners and Guardian Investment Corporation managed and controlled the affairs of the Partnership and had general responsibility and authority in all matters affecting its business.
Griffin Companies, a Minnesota corporation organized in 1969, and its affiliates are engaged in real estate brokerage, real estate investment counseling, and management of commercial and multi-family real estate. Griffin Companies and its Affiliates have organized and served as general partners in thirty-two privately placed partnerships and six publicly offered partnerships, which were formed for the purpose of real estate investment.
The General Partner and its Affiliates provided executive, supervisory and certain administrative services for the Partnership's operations and the General Partner was responsible for determining whether, when and on what terms properties should be sold or refinanced. In addition, the books and records of the Partnership are maintained by Griffin Companies, and are subject to audit by independent certified public accountants. The partners of the General Partner have intended to devote only as much of their time to the business of the Partnership as they determined to be reasonably required. Limited Partners had no right to participate in the management of the Partnership.
The identity and business experience of each of the partners of the General Partner is as follows:
Larry D. Fransen (age 56) founded Griffin Companies in 1969. He is a Director and senior officer of each of its operating entities, in addition to serving as Chairman.
Since 1969, he has acted as general partner in many partnerships investing in apartments, office buildings, warehouses, land and motels.
Acting on behalf of Griffin Companies' clients, Mr. Fransen has negotiated the acquisition and disposition of more than one billion dollars in investment real estate properties nationwide.
He is a member of numerous professional organizations, including the Greater Minneapolis Area Board of Realtors, the Minnesota Association of Realtors, the National Association of Realtors (NAR), Minnesota Multi Housing Association (MHA), National Multi-Housing Council (NMHC), the National Apartment Association (NAA), Commercial and Investment Institute, National Association of Real Estate Investment Trusts (NAREIT), and the Pension Real Estate Association (PREA).
Mr. Fransen holds the CCIM (Certified Commercial Investment Member) designation of the Commercial Investment Institute, as well as the SRS (Specialist in Real Estate Securities) designation. For 13 years, he was an instructor for the Commercial Investment Institute and served as the group's national president in 1983. He has been awarded the Omega Tau Rho Medal of Service for his years of service to the National Association of Realtors.
Robert S. Dunbar (57) is Chief Executive Officer of Griffin Companies.
Following several years with Control Data Corporation where he held various administrative and management positions, he was named Executive Vice President of the U.S. Jaycees in 1970, with responsibility for planning, budgeting and administration of the national organization. In 1972, he joined Ed. Phillips & Sons Company in Minneapolis, Minnesota as a sales manager. In 1975 he was elected President of Westland Capital Corporation, a Minneapolis venture capital firm, where he was responsible for analyzing various companies for potential investment opportunities. He joined Griffin Companies in 1977.
Mr. Dunbar is a member of the Institute of Real Estate Management (IREM) and the Minnesota Multi Housing Association (MHA). He holds the Certified Apartment Manager (CAM) designation of the National Apartment Association and is a Certified Property Manager (CPM) as designated by the National Association of Realtors. Mr. Dunbar also holds a Minnesota Real Estate Broker's License and has completed the necessary course work for their prestigious Certified Commercial Investment Member (CCIM) designation conferred by the Commercial Investment Institute. He is a member of the national Multi-Housing Council and The Executive Committee (T.E.C.). He also serves on the Board of Trustees of Northwestern College.
Messrs. Fransen and Dunbar together own 100% of the issued and outstanding shares of common stock of Griffin Companies. The partners of the General Partner represent and warrant that they have a collective personal net worth on an unaudited cost basis and on an unaudited estimated current value basis (measured as total assets at estimated current value less all liabilities) in excess of $1,500,000. The assets of the partners of the General Partner are largely invested in interests in real property and in Griffin Companies. Therefore, it may be difficult to precisely value such assets or to liquidate such assets expeditiously or on terms favorable to the seller.
Item 11.
Item 11. Management Remuneration and Transactions
Partners of the General Partner receive no current or proposed direct remuneration in such capacity. The Partnership is required to pay a management fee to Griffin Companies and the General Partner is entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of profits or losses as described below:
. Profits and losses, other than from refinancing or from the sale of Partnership properties, are allocated 99% to the limited partners and 1% to the general partner.
. Cash flow distributions, other than from refinancing or from the sale of Partnership properties, are allocated 95% to the limited partners and 5% to the general partner.
. Net proceeds from refinancing or from the sale of property other than upon liquidation, less any necessary liability reserves or debt payments, will be distributed in the following order subject to the general partner receiving at least 1% of the distributions:
.. First, to the limited partners to the extent that prior distributions are less than the original capital contribution plus 6% per annum (as defined in the Partnership Agreement);
.. Second, any unpaid real estate commissions due to the general partner on the resale of the Partnership properties;
.. Third, any remaining balance, 85% to the limited partners and 15% to the general partner.
The Partnership was entitled to engage in various transactions involving affiliates of the General Partner of the Partnership.
Griffin Companies ("Griffin"), an affiliate of the General Partner, was permitted to be reimbursed for direct expenses relating to the administration of the Partnership and operation of the Partnership real property investments. Griffin received approximately $20,394, $13,284, and $18,735 in 1996, 1995 and 1994 respectively, for these expenses.
Reference is made to Note 5 of Notes to Financial Statements appearing elsewhere in this annual report for a description of related party transactions.
Item 12.
Item 12. Limited Partnership Ownership of Certain Beneficial Owners and Management
No person or any "group" is known by the Partnership to have owned beneficially more than 5% of the outstanding units of the Partnership.
The individual general partners of the General Partner as a group had the following interest in the Partnership:
No partner of the General Partner possessed a right to acquire beneficial ownership of interest of the Partnership.
Item 13.
Item 13. Certain Relationships and Related Transactions
The partners of Griffin Equity Partners and the shareholders of Guardian Investment Corporation, the general partners of the Partnership, are also owners and/or employees of Griffin Companies, a Minnesota corporation. Accounts payable - affiliates consisted of unpaid management fees to and advances from Griffin Companies. The following is a summary of approximate fees incurred for the years ended December 31:
1996 1995 1994 ---- ---- ----
Property management fees $57,814 $ 70,508 $ 73,756 Major improvement supervisory fees 8,503 10,943 9,777
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
The following documents are filed as part of this report:
Exhibit 13: Financial Statements and Schedules.
Exhibit 27: Financial Data Schedule
An 8-K was filed on October 8, 1996 in regards to the sale of the Bass Lake Building. Proforma Financial Information was included with this filing.
An 8-K was filed on November 26, 1996 in regards to the sale of the Industry Park Building. Proforma Financial Information was included with this filing.
No annual report or proxy material for the fiscal year 1996 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing substantially similar to this form 10K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 27, 1997 Griffin Real Estate Fund-VI, A Limited Partnership
By: Larry D. Fransen/s/ Larry D. Fransen for the General Partner Griffin Equity Partners
Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following person on behalf of the Registrant and in the capacity and on the date indicated.
Dated: March 27, 1997 By: Larry D. Fransen/s/ ------------------- Larry D. Fransen Managing General Partner of the General Partner Griffin Equity Partners