Item 1. Business
Vanguard Real Estate Fund I, A Sales-Commission-Free Income Properties Fund (the "Fund"), was organized on September 10, 1986 as a Massachusetts business trust and is a qualified finite-life real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended. The Fund has no employees. The Fund's Declaration of Trust precludes the Fund from reinvesting net proceeds from the sale or repayment of its real estate investments after December 31, 1993 and contemplates the liquidation of all the Fund's investments after a period of approximately seven to twelve years following the completion of its initial public offering, or between June 30, 1994 and 1999, respectively.
On December 12, 1994, the Fund's Board of Trustees adopted a Plan of Liquidation and Termination (the Liquidation Plan ). The Trustee's decision to adopt the Liquidation Plan at this point in the Fund's initially contemplated liquidation period was driven by several factors, including real estate market conditions affecting each investment in the Fund's portfolio and tax considerations affecting real estate investment trusts. The Liquidation Plan provides that the Fund will dispose of all of its assets, wind up its affairs, pay or adequately provide for the payment of all of its liabilities and distribute for the benefit of its shareholders all of the Fund's assets over 24 months, in complete cancellation and redemption of all issued and outstanding shares of beneficial interest. Under the Liquidation Plan, the Fund's Adviser, Aldrich, Eastman and Waltch, L.P., Trustees and officers are authorized and directed to take any and all actions as may be necessary or convenient to market the assets of the Fund and convert them into a form that may be distributed to shareholders. The Liquidation Plan provides that the Fund's assets may be sold, conveyed, transferred or otherwise disposed of when and on such terms and conditions as are deemed by the Trustees to be in the best interests of the Fund and the shareholders.
The Fund is currently in the process of liquidating its real estate investments and distributing the net proceeds to its shareholders in accordance with the Liquidation Plan. At December 31, 1994, the Fund held investments in four income-producing properties or portfolios, including three commercial properties (consisting of one office complex located outside of Minneapolis, Minnesota, and shopping centers located in Torrance, California and Durham, North Carolina) and one residential apartment complex located in Montgomery County, Maryland. It is contemplated that the Fund will be completely liquidated and dissolved by December 12, 1996. To the extent that the Fund has not disposed of all of its assets or made provision for all of its liabilities on December 12, 1996, the Fund intends to form a liquidating trust, the beneficiaries of which will be the shareholders of the Fund. All assets and liabilities of the Fund not previously disposed of and discharged will be transferred to the liquidating trust. Shares of the Fund would no longer be traded and the beneficial interests in the liquidating trust would not be readily transferable. As of February 28, 1995, approximately $41 million was invested in real estate assets, of which $28 million (68%) consisted of real estate owned directly, $11 million (27%) consisted of a mortgage loan investment, and $2 million (5%) consisted of marketable securities.
Pending disposition of the Fund's real estate investments pursuant to the Liquidation Plan, the Fund's real estate investments will continue to be subject to competition from existing commercial, industrial, and residential properties and will be subject to competition from properties that are developed in the future. The REIT provisions of the Code impose certain financial, investment and operational restrictions that are not applicable to competing entities that are not REITs.
Pursuant to the Liquidation Plan, in disposing of real estate investments, the Fund is in competition with other domestic institutional investors, including commercial banks and other financial institutions, insurance companies, pensions and other retirement funds, mortgage bankers, other real estate investment trusts, real estate brokers, developers and various types of foreign investors who may be seeking to dispose of real estate investments. The principal factors of competition for the disposition of the mortgage loan receivable include the base interest rate, contingent interest rate and the amount of loan relative to the value of the underlying property. In the case of leased properties which the Fund owns or which secure Fund investments, the marketability of the investments is also affected by how rental rates, lease terms, free rent concessions and tenant improvement allowances compare with those in local markets.
Pursuant to a Services Agreement dated December 23, 1986 (the "Services Agreement") between the Fund and The Vanguard Group, Inc. (the "Sponsor"), the Sponsor has been retained to provide administrative services for the Fund, including the maintenance of financial records, oversight of the performance of outside service providers and the preparation and distribution of communications to shareholders, etc., and to supervise its day-to-day business affairs. Pursuant to an Advisory Agreement dated December 23, 1986 (as amended, the "Advisory Agreement") between the Fund and Aldrich, Eastman & Waltch, Inc. (the "Adviser"), the Adviser has been retained to advise the Fund in connection with the evaluation, selection, management and disposition of its real estate investments. For additional information concerning the Sponsor, the Adviser, the Services Agreement and the Advisory Agreement, see Item 8, Financial Statements and Supplementary Data - Notes to Financial Statements, and Item 13, Certain Relationships and Related Transactions.
The Fund has elected to be treated as a REIT under the Code. The Fund intends to operate in a manner that will continue to maintain its qualification as a REIT during its liquidation period.
For additional information regarding the Fund's Liquidation Plan, investments, operations, and other significant events, see Item 2, Properties, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 8, Financial Statements and Supplementary Data.
The following table sets forth the names and positions with the Fund of the executive officers of the Fund:
NAME AGE POSITIONS John C. Bogle 65 Trustee and Chairman of the Board John J. Brennan 40 President Ralph K. Packard 50 Vice President and Controller Richard F. Hyland 57 Treasurer Raymond J. Klapinsky 56 Secretary
All executive officers of the Fund also serve as executive officers of Vanguard Real Estate Fund II, A Sales-Commission-Free Income Properties Fund ("VREFII"). All executive officers of the Fund, with the exceptions of Mr. Packard, who was elected as an officer of the Fund in May 1988, and Mr. Klapinsky, who was elected as an officer of the Fund in May 1989, have served since the Fund's inception. Under the Fund's Declaration of Trust, the officers of the Fund serve at the pleasure of the Trustees. There are no family relationships between any Trustee or executive officer.
Mr. Bogle is Chairman and Chief Executive Officer of the Fund, The Vanguard Group, Inc. (the Sponsor of the Fund) and each of the investment companies in The Vanguard Group. Mr. Bogle has served in such capacities during each of the past five years. Mr. Bogle also serves as a Director of The Mead Corporation and General Accident Insurance Companies.
Mr. Brennan is President of The Vanguard Group, Inc. and has served in such capacity during each of the past five years. Mr. Brennan also serves as a Director (Trustee) of The Vanguard Group, Inc., and each of the investment companies in The Vanguard Group.
Mr. Packard is Senior Vice President and Chief Financial Officer of The Vanguard Group, Inc. and has served in such capacity during each of the past five years.
Mr. Hyland is, and has served for each of the past five years as, Treasurer of The Vanguard Group, Inc. and each of the investment companies in The Vanguard Group.
Mr. Klapinsky is, and has served for each of the past five years as, Senior Vice President and Secretary of The Vanguard Group, Inc. and each of the investment companies in The Vanguard Group.
Item 2.
Item 2. Properties
As of December 31, 1994, the Fund held the following real estate investments:
*Property was a mortgage loan investment from 12/8/88 - 4/13/94.
* In late September 1994, the Fund exercised its call right with respect to its Plaza del Amo mortgage loan investment. As a result, the entire balance of the loan, less the unpaid balance of the senior mortgage on the Plaza property, was due and payable on March 26, 1995. The borrower failed to tender payment of the outstanding loan balance on March 26, 1995 and is now in default under the terms of the loan. The Fund and the borrower are currently negotiating in an effort to seek a resolution of the default, which resolution may include satisfaction of the loan by means of a transfer of title of the property to the Fund in lieu of foreclosure. Since, as of the exercise of the call right and as of December 31, 1994 the appraised value of the Plaza property securing the loan was in excess of the mortgage loan's current carrying value, no loss is currently expected to be incurred by the Fund as a result of the default. The borrower is also expected to continue to pay all interest due until transfer of the property to the Fund.
Set forth below is a summary of the general competitive conditions for those properties whose book value is ten percent or more of the Fund's total assets as of December 31, 1994, or whose gross revenues are ten percent or more of the aggregate gross revenues of the Fund for the year ended December 31, 1994.
Plaza del Amo -------------
Plaza Del Amo is a neighborhood shopping center located in Torrance, California, a highly dense trade area (3-mile ring) with approximately 215,000 residents. Torrance is a submarket of the South Bay area of Southern California, where the economy, seriously undermined by the recent recession in the defense and aerospace industries, is showing the initial signs of recovery after a 4 1/2 year downturn. Population growth of 3.9% over the past five years has improved significantly and is currently outpacing Los Angeles County's rate (3.0%). Household incomes have lagged behind those of the Los Angeles market. Per capita and the median household income grew 10.3% and 6.3% over the past five years in the trade area versus 13.2% and 6.8%, respectively, in Los Angeles. While Torrance is a mature city with relatively little population growth projected over the next five years, retail sales are beginning to increase again. In 1994, retail sales grew approximately 4%; however retail construction permit activity has decreased by approximately 14%. Current vacancy rates for retail space are at 10%. The only planned project in Torrance is a Kmart 500,000 square foot center. Market rental rates currently range from $1.70 per square foot to $1.90 per square foot monthly.
Oakcreek Village ----------------
Oakcreek Village is a neighborhood shopping center located in Durham, North Carolina. Annual population growth has been approximately 2% over the past three years; while households have grown over 11% during that time. The median household income has grown approximately 22% in the last five years while per capita income increased approximately 27% during that time. The market vacancy rate remains tight at only 3%. Market rental rates have risen at an annual average rate of 7% over the past two years, from $9.50- $11.50 per square foot NNN (triple net leases) to $10.50-$13.50 per square foot NNN.
Sheffield Forest Apartments ---------------------------
Sheffield Forest is a 256-unit multi-family apartment complex located in Silver Springs, Maryland. Employment growth in 1994 for the area was approximately 1.8%. The combination of no new apartment deliveries in 1994 coupled with strong rental demand has pushed the market vacancy rate below 5%. There was no significant rent growth in 1994; however, due to the low vacancy and limited apartment development, the outlook for rent growth is positive. Current monthly market rents are approximately $.75-$1.10 per square foot.
Minnesota Portfolio -------------------
The Minnesota Portfolio currently consists of one office building and one retail/service center building located in the Minneapolis/St. Paul suburbs of Shoreview and Roseville, respectively. The Minneapolis/St. Paul unemployment rate of 3.4% is lower than the national rate of 6.5%. Population growth in Shoreview is expected to be nearly 2% over the next year. Current market vacancy rates for Shoreview and Roseville are 7.3% and 8.4%, respectively. Annual market rental rates are $8.50 per square foot and $6.25 per square foot.
Occupancy Rates at December 31: -------------------------------
Plaza Del Oakcreek Minnesota Sheffield Amo Village Portfolio* Forest Apt. --------- -------- --------- -----------
1994 99% 96% 100% 96% 1993 98% 96% 99% 93% 1992 94% 95% 99% 93% 1991 92% 94% 99% 93% 1990 100% 97% 75% 96%
*1990-1993 data includes Deluxe Check Building, sold in August of 1994; 1990 data includes Zycad Building, sold in May of 1991.
Avg. Effective Rental/Sq.Ft./Year: ------------------
Plaza Del Oakcreek Minnesota Sheffield Amo Village Portfolio** Forest Apt.* --------- -------- --------- ------------
1994 $13.28 $9.94 $7.02 $9,394 1993 $13.23 $9.07 $8.06 $8,796 1992 $13.06 $9.11 $7.95 $8,976 1991 $13.72 $9.47 $8.71 $9,240 1990 $13.11 $8.82 $7.40 $9,180 * Annual rent/unit. ** Includes Deluxe Check and Zycade Buildings through their respective disposition dates.
Real Estate Tax/Fiscal Year: Effective Rate Per $1000 of Assessed Value $11.74 $16.24 $61.33 $27.84
Annual Taxes $86,547 $103,233 $82,858 $183,227
Leases at Sheffield Forest are generally one year or less and no individual tenant exceeds ten percent of the units rented.
A mortgage loan payable, secured by the Plaza del Amo property, is outstanding at December 31, 1994. Information concerning its principal, interest rate, amortization and maturity provisions is included in Note H to the Fund's financial statements, incorporated by reference in Item 8, Financial Statements and Supplementary Data, and in Schedule XII to Item 14.
Information concerning the interest rates, shared-appreciation features, and other terms of the Fund's mortgage investment is included in Note F to the Fund's Financial Statements, included in Item 8, Financial Statements and Supplementary Data, and in Schedule XII to Item 14.
The Fund believes that its direct ownership properties and the property underlying its mortgage investment are well maintained, in good repair, suitable for their intended uses and are adequately covered by insurance. For additional information regarding the Fund's real estate investments see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, Item 8, Financial Statements and Supplementary Data, and Schedules XI and XII to Item 14.
The Fund has no other significant renovation, improvement or development plans for its properties.
Information concerning the Federal tax basis and depreciation method and lives of the Fund's properties and components thereof and on which depreciation is taken is included in Notes A and E to the Fund's Financial Statements, included in Item 8, Financial Statements and Supplementary Data, and in Schedule XI to Item 14. All real estate owned has been depreciated over 40 years for both financial and tax reporting purposes on a straight-line basis except for leasehold improvements, which are depreciated over the term of the respective lease for financial reporting purposes.
Item 3.
Item 3. Legal Proceedings -------------------------
None
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders -----------------------------------------------------------
None
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters ---------------------------------------------------------------------
The Fund's shares of beneficial interest ("Shares") are traded on the American Stock Exchange (AMEX) under the symbol "VRO". The Shares have been traded on the AMEX since August 20, 1991. From July 24, 1989 to August 19, 1991, the Fund's shares were traded on the over the counter market and were quoted by the National Association of Securities Dealers Automated Quotation System ("NASDAQ"). Prior to July 24, 1989, there was no trading market for the Shares. As of February 28, 1995, there were approximately 15,542 holders of record of the Fund's Shares.
Set forth below is certain information regarding the Fund's Shares for each of the eight fiscal quarters in the two-year period ended December 31, 1994:
Year Ended December 31, ---------------------------------------- 1994 1993 Share Prices Share Prices ------------------- ------------------- High Low High Low ---- ---- ---- ---- For the Quarter Ended:
March 31 $8.00 $7.375 $8.25 $6.625
June 30 $7.25 $6.25 $8.00 $7.25
September 30 $6.625 $5.75 $8.25 $7.375
December 31 $7.626 $3.50* $8.75 $7.375
* A liquidating dividend of $3.54 per share was paid on December 29, 1994.
The tables below indicate the amount of cash dividends per share declared and paid during the years ended December 31, 1994 and 1993.
Record Distribution Date Per Share -------------- ------------ 03-31-94 $ .15 06-30-94 .15 09-30-94 .15 12-27-94 3.69 ----- Total Distributions-1994 $ 4.14 =====
Record Distribution Date Per Share -------------- ------------ 03-31-93 $ .15 06-30-93 .15 09-30-93 .15 12-22-93 1.24 ----- Total Distributions-1993 $ 1.69 =====
Status of Distributions 1994 1993 ----------------------- ---- ---- Ordinary Income $ .01 $ .00 Return of Capital .35 1.69 Long-term Capital Gain .09 .00 Liquidating 3.69 .00 ----- ----- Total $ 4.14 $ 1.69 ===== =====
Except during its offering period, the Fund has historically paid distributions on a quarterly basis and there are currently no contractual restrictions on the Fund's present or future ability to make distributions to shareholders. For additional information regarding the Fund's distributions and its ability and intent to pay distributions during the liquidation period, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 6.
Item 6. Selected Financial Data -------------------------------
The information required by this Item is included on page 20 of the Fund's 1994 Annual Report to Shareholders and is incorporated herein by reference thereto.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -----------------------------------------------------------------------
The information required by this Item is included on pages 21 through 28 of the Fund's 1994 Annual Report to Shareholders and is incorporated herein by reference thereto.
Item 8.
Item 8. Financial Statements and Supplementary Data ---------------------------------------------------
The Fund's financial statements at December 31, 1994 and 1993, and for each of the three years in the period ended December 31, 1994 are included on pages 7-18 of the Fund's 1994 Annual Report to Shareholders and are incorporated herein by reference thereto.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure -----------------------------------------------------------------------
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant -----------------------------------------------------------
The information required by this Item with respect to Trustees is included in the Fund's definitive Proxy Statement filed with the Securities and Exchange Commission on March 13, 1995 for its Annual Meeting of Shareholders to be held on April 18, 1995, which is incorporated herein by reference thereto. (Information with respect to executive officers of the Fund is included in Item 1.)
Item 11.
Item 11. Executive Compensation -------------------------------
The information required by this Item is included in the Fund's definitive Proxy Statement filed with the Securities and Exchange Commission on March 13, 1995 for its Annual Meeting of Shareholders to be held on April 18, 1995, which is incorporated herein by reference thereto.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management -----------------------------------------------------------------------
The information required by this Item is included in the Fund's definitive Proxy Statement filed with the Securities and Exchange Commission on March 13, 1995 for its Annual Meeting of Shareholders to be held on April 18, 1995, which is incorporated herein by reference thereto.
Item 13.
Item 13. Certain Relationships and Related Transactions -------------------------------------------------------
The information required by this Item is included in the Fund's definitive Proxy Statement filed with the Securities and Exchange Commission on March 13, 1995 for its Annual Meeting of Shareholders to be held on April 18, 1995, which is incorporated herein by reference thereto.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K -------------------------------------------------------------------------
(a) 1. Financial Statements: --------------------
The following financial statements as of, and for the years ended, December 31, 1994, 1993 and 1992 are incorporated in Item 8 herein by reference from the following pages of the Fund's 1994 Annual Report to Shareholders, which is filed as an Exhibit hereto.
ANNUAL REPORT PAGE NO.
Balance Sheets 7 Statements of Operations 8 Statements of Cash Flows 9-10 Statements of Changes in Shareholders' Equity 11 Notes to Financial Statements 12-18 Report of Independent Accountants 19
2. Financial Statement Schedules:
The financial statement schedules included in Part IV of this report should be read in conjunction with the Fund's financial statements incorporated by reference in Item 8 of this report. FORM 10-K SCHEDULE PAGE NO.
X Supplementary Income Statement Information 17 XI Real Estate and Accumulated Depreciation 18-19 XII Mortgage Loans on Real Estate 20 Report of Independent Accountants 21
All other schedules have been omitted since the required information is presented in the financial statements, the related notes, or is not applicable.
3. Exhibits: --------
Exhibit No. Description ----------- -----------
2 Plan of Liquidation and Termination, dated December 12, 1994.
3.1 Amended and Restated Declaration of Trust, dated December 9, 1986, filed as exhibit 3 to the Fund's Registration Statement on Form S-11, SEC Registration #33-8649, and incorporated herein by reference.
3.2 Amendment #1 to Amended and Restated Declaration of Trust, dated January 10, 1987, filed as exhibit 3(b) to the Fund's Registration Statement on Form S-11, SEC Registration #33- 15040, and incorporated herein by reference.
3.3 Amendment #2 to Amended and Restated Declaration of Trust, dated May 31, 1988, filed as exhibit 3 to the Fund's Quarterly Report on Form 10-Q for the quarter ended June 30, 1988, and incorporated herein by reference.
3.4 By-laws, filed as exhibit 3 to the Fund's Registration Statement on Form S-11, SEC Registration #33-8649, and incorporated herein by reference.
10.1 Advisory Agreement between the Fund and Aldrich, Eastman & Waltch, Inc. dated December 23, 1986, filed as exhibit 10.1 to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.2 Services Agreement between the Fund and The Vanguard Group, Inc. dated December 23, 1986, filed as exhibit 10.2 to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.3(a) Loan Agreement by and between Plaza Del Amo and Lawrence W. Doyle, J. Grant Monahon and Richard F. Burns, Trustees of AEW #82 Trust, established by Declaration of Trust dated August 14, 1987, dated September 16, 1987, filed as exhibit 10.3(a) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.3(b) Declaration of Trust, AEW #82 Trust and Schedule of Beneficial Interest dated August 14, 1987, filed as exhibit 10.3(b) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.3(c) All-Inclusive Promissory Note from Plaza Del Amo in favor of Lawrence W. Doyle, J. Grant Monahon and Richard F. Burns, Trustees of AEW #82, established by Declaration of Trust dated August 14, 1987, dated September 16, 1987, filed as exhibit 10.3(c) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 and incorporated herein by reference.
10.4(a) Purchase and Sale Agreement of Oakcreek Village Shopping Center, between Pacific Guaranty Retail Development Corporation and Michael O. Craig, Richard F. Burns and J. Grant Monahon as Trustees of AEW #96 Trust, under Declaration of Trust dated November 6, 1987, dated October 31, 1987, filed as exhibit 10.4(a) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.4(b) Declaration of Trust, AEW #96 Trust and Schedule of Beneficial Interest, dated November 6, 1987, filed as exhibit 10.4(b) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.4(c) First Amendment to Purchase and Sale Agreement of Oakcreek Village Shopping Center between Pacific Guaranty Retail Development Corporation and Michael O. Craig, Richard F. Burns and J. Grant Monahon as Trustees of AEW #96 Trust, under Declaration of Trust dated November 6, 1987, dated November 24, 1987, filed as exhibit 10.4(c) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.5(a) Purchase and Sale Agreement of Valley Industrial Park and Sea-Tac Industrial Park between Prudential Insurance Company of America and Joseph F. Azrack, Richard F. Burns and J. Grant Monahon as Trustees of AEW #105 Trust, under Declaration of Trust dated December 23, 1987, dated January 8, 1988, filed as exhibit 10.5(a) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.5(b) Declaration of Trust, AEW #105 Trust and Schedule of Beneficial Interest, dated December 23, 1987, filed as exhibit 10.5(b) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.6(a) Purchase and Sale Agreement of Vita-Fresh Vitamin Facility, dated January 10, 1988, between Vita-Fresh Vitamin Company, Inc. and Lawrence W. Doyle, Richard F. Burns and J. Grant Monahon as Trustees of AEW #113 Trust, under Declaration of Trust dated January 10, 1988, filed as exhibit 10.6(a) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.6(b) Declaration of Trust, AEW #113 Trust and Schedule of Beneficial Interest, dated January 19, 1988, filed as exhibit 10.6(b) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.7(a) Purchase and Sale Agreement of Everest I, Everest II, Fairview Industrial Building and Shoreview Professional Building between Everest Development ltd. and Michael O. Craig, Richard F. Burns and J. Grant Monahon as Trustees of AEW #106 Trust, under Declaration of Trust dated December 17, 1987, dated February 8, 1988, filed as exhibit 10.7(a) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.7(b) Declaration of Trust, AEW #106 Trust and Schedule of Beneficial Interest, dated December 17, 1987, filed as exhibit 10.7(b) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
10.8 All-Inclusive Promissory Note (Wraparound note) dated May 11, 1988, Escrow Agreement dated May 27, 1988 and Option Agreement dated May 11, 1988, all relating to the Fund's mortgage investment in the Carmel Executive Park, filed as exhibit 10 to the Fund's Quarterly Report on Form 10-Q Report for the quarter ended June 30, 1988, and incorporated herein by reference.
10.9(a) Purchase and Sale Agreement of Citadel II office building, between Crow Vista #1 and Aldrich, Eastman & Waltch, Inc., a Massachusetts Corporation acting as agent for the Fund, filed as exhibit 10(a) to the Fund's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1988, and incorporated herein by reference.
10.9(b) Citadel II Escrow Agreement, filed as exhibit 10(b) to the Fund's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988, and incorporated herein by reference.
10.10(a) Loan Agreement for Sheffield Forest Apartments by and between Lincoln Park Place II Limited Partnership and J. Grant Monahon, Richard F. Burns and Marvin M. Franklin, Trustees of AEW #145 Trust, established by Declaration of Trust dated October 14, 1988, dated December 7, 1988, filed as exhibit 10.10(a) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference.
10.10(b) Second Amended and Restated Promissory Note for Sheffield Forest Apartments from Lincoln Park Place II Limited Partnership in favor of J. Grant Monahon, Richard F. Burns and Marvin M. Franklin, Trustees of AEW #145 Trust, established by Declaration of Trust dated October 14, 1988, dated December 7, 1988, filed as exhibit 10.10(b) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by reference.
10.10(c) Amended and Restated Deed of Trust for Sheffield Forest Apartments by and between Lincoln Park Place II Limited Partnership and J. Grant Monahon, Richard F. Burns and Marvin M. Franklin, Trustees of AEW #145 Trust, established by Declaration of Trust dated October 14, 1988, dated December 7, 1988, filed as exhibit 10.10(c) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference.
10.10(d) Declaration of Trust, AEW #145 Trust and Schedule of Beneficial Interest dated October 14, 1988, filed as exhibit 10.10(d) to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference.
10.11(a) Promissory note of Citadel II by and between the Variable Annuity Life Insurance Company and J. Grant Monahon, Richard F. Burns, and Lee H. Sandwen, Trustees of AEW #131 Trust, established by Declaration of Trust dated June 7, 1988, dated October 9, 1990, filed as exhibit 10.1(a) to the Fund's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990, and incorporated herein by reference.
10.11(b) Mortgage and Security Agreement of Citadel II by and between the Variable Annuity Life Insurance Company and J. Grant Monahon, Richard F. Burns, and Lee H. Sandwen, Trustees of AEW #131 Trust, established by Declaration of Trust dated June 7, 1988, dated October 9, 1990, filed as exhibit 10.1(b) to the Fund's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990, and incorporated herein by reference.
10.11(c) Assignment of Lessor's Interest in Leases of Citadel II by and between the Variable Annuity Life Insurance Company and J. Grant Monahon, Richard F. Burns, and Lee H. Sandwen, Trustees of AEW #131 Trust, established by Declaration of Trust dated June 7, 1988, dated October 9, 1990, filed as exhibit 10.1(c) to the Fund's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990, and incorporated herein by reference.
10.12 Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate by and between the Fujita Corporation USA, a California Corporation, and Richard F. Burns, J. Grant Monahon, Lawrence W. Doyle, Trustees of AEW #113 Trust, established by Declaration of Trust dated January 19, 1988, filed as exhibit 10.12 to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference.
10.13 Purchase and Sale Agreement of the Everest I ("Zycad") Building by and between Richard F Burns, J. Grant Monahon, and Bruce H. Freedman as Trustees of AEW #106, under Declaration of Trust dated December 17, 1987 and JLS and L.P., dated April 23, 1991, filed as exhibit 10.13 to the Fund's Quarterly Report on Form 10-Q for the quarter ended March 31, 1991 and incorporated herein by reference.
10.14 Settlement Agreement and Mutual Release from mortgage by and among J. Grant Monahon, Richard F Burns and Lee. H. Sandwen, Trustees of AEW #155 Trust under Declaration of Trust dated January 11, 1989, Mark C. Dickinson, Dickinson Development Corp. and Citadel III Partners, Ltd., a Florida limited partnership, dated December 30, 1991, filed as exhibit 10.14 to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein by reference.
10.15 First Amendment to Second Amended and Restated Promissory Note by and between Lincoln Park Place II Limited Partnership, a Maryland limited partnership and J. Grant Monahon, Richard F. Burns and Devin McCall, Trustees of AEW #145 Trust under Declaration of Trust dated October 14, 1988 dated April 30, 1992, filed as exhibit 10.15 to the Fund's Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 and incorporated herein by reference.
10.16 Amendment No.1 to Loan Agreement by and between Lincoln Park Place II Limited Partnership, a Maryland limited partnership and J. Grant Monahon, Richard F. Burns and Kevin McCall, Trustees of AEW #145 Trust under Declaration of Trust dated October 14, 1988, dated April 30. 1992, filed as exhibit 10.16 to the Fund's Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 and incorporated herein by reference.
10.17 Amendment No.1 to All-Inclusive Promissory Note by and between Piazzagalli Development Company, a Vermont General Partnership and J. Grant Monahon, Richard F. Burns and Lee H. Andwen, Trustees of AEW #127 Trust, under Declaration of Trust dated May 3, 1988, dated December 23, 1991 for purposes of reference, filed as exhibit 10.17 to the Fund's Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 and incorporated herein by reference.
10.18 Amendment No.1 to Loan Agreement by and between Piazzagalli Development Company, a Vermont General Partnership and J. Grant Monahon, Richard F. Burns and Lee H. Sandwen, Trustees of AEW #127 Trust, under Declaration of Trust dated May 3, 1988, dated December 23, 1991 for purposes of reference, filed as exhibit 10.18 to the Fund's Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 and incorporated herein by reference.
10.19 Purchase and Sale Agreement of the Seattle Industrial Parks, by and between AEW #105 Trust and Spieker Properties, Inc., dated September 21, 1994.
13 1994 Annual Report to Shareholders. (With the exception of the information and data incorporated by reference in Items 6, 7, and 8 of this Annual Report on Form 10-K, no other information or data appearing in the 1994 Annual Report to Shareholders is to be deemed filed as part of this report.)
27 Financial Data Schedule. A Financial Data Schedule for the year ended December 31, 1994, was submitted in electronic format only.
(b) Reports on Form 8-K
During the fourth quarter ended December 31, 1994, the Fund filed a Report on Form 8-K, dated October 3, 1994, reporting, in Item 2, the sale of its Seattle Industrials investment and a Report on Form 8-K dated December 12, 1994, reporting, in Item 5, the adoption of the Fund's formal Plan of Liquidation and Termination.
SCHEDULE X
VANGUARD REAL ESTATE FUND I A SALES-COMMISSION-FREE INCOME PROPERTIES FUND SUPPLEMENTARY INCOME STATEMENT INFORMATION
Year Ended December 31, --------------------------- 1994 1993 1992 (000) (000) (000) ----- ----- -----
1. Maintenance and repairs $ 548 $ 275 $ 374
2. Depreciation and amortization 1,073 1,503 1,610
3. Real estate taxes 671 823 887
SCHEDULE XI
(a) Write downs in the carrying value of the Fund's three direct ownership investments have been recorded, upon adoption of the Liquidation Plan in December 1994, to reflect the effect of their held for sale status on management's assessment of the investment's recoverability. (b) The aggregate cost of real estate for federal income tax purposes at December 31, 1994 was $29,137,000.
SCHEDULE XI (Continued) (c) The activity in real estate is summarized as follows:
* The Fund purchased the Citadel II office building ("Citadel II") for a contract price of $19,500,000. Included in the contract price was a $1,000,000 contingent purchase price payment placed in escrow for the Fund, of which an aggregate of $618,000 was returned to the Fund by the seller at the expiration of the escrow period pursuant to the terms of the purchase and sale agreement.
(d) Reconciliation of accumulated depreciation is summarized as follows:
(e) Zycad Building sold in 1991 with a land and building cost of $1,894,000, Deluxe Check Building sold in August, 1994, with an original land and building and improvement cost of $7,719,000. (f) Prior to the adoption of the Liquidation Plan, depreciation on real estate owned was computed using the straight-line method over 40 years for buildings and costs incurred in conjunction with the acquisition of real estate investments were deferred and amortized on a straight- line basis over the life of the loan for mortgage loan investments and the life of the property for equity investments. Subsequent to adoption of the Liquidation Plan, no depreciation or amortization expense related to the Fund's owned real estate and acquisition costs is recognized since the Fund's real estate investments are considered to be held for sale. (g) Sheffield Forest was obtained on April 13, 1994, via a transfer of all of the partnership interests of the borrower to the Fund in full satisfaction of the mortgage loan secured by the Sheffield property, and recorded at its then-appraised fair market value.
SCHEDULE XII VANGUARD REAL ESTATE FUND I, A SALES-COMMISSION-FREE INCOME PROPERTIES FUND MORTGAGE LOANS ON REAL ESTATE (c) DECEMBER 31, 1994
Wraparound Mortgage
Description Plaza del Amo Shopping Center, Torrance, CA (a) Effective Rate 10.3% Pay Rate 9.7%-10.8% Maturity Date 1995 (a) Call Date 1994 Periodic Payment Terms Interest only, principal due upon maturity or call date. Prior Liens (a) Face Amount of Mortgage $10,646,000 Carrying Amount of Mortgage (b) $10,646,000 Principal Amount of Loan Subject to Delinquent Principal or Interest None
(a) The Fund advanced $7,750,000 to enter into a shared-appreciation, wraparound, mortgage loan secured by the Plaza del Amo Shopping Center ( Plaza ). In addition, Plaza secures two existing senior mortgage loans, which at the time of investment had an aggregate outstanding balance of $2,896,000. The funds advanced plus these two existing senior mortgages resulted in a total wraparound loan of $10,646,000. Upon repayment of the loan, the Fund is entitled to a share of Plaza's appreciation, if any, equal to 50% of Plaza's fair market value in excess of the original balance of the wraparound loan. In late September 1994, the Fund exercised its call right with respect to the Plaza loan and, therefore, the entire balance of the loan, less the unpaid balance of the senior mortgage on the property, becomes due and payable six months from the exercise of the call right.