SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-9541
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BALCOR EQUITY PROPERTIES LTD.-VIII
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(Exact name of registrant as specified in its charter)
Illinois 36-3011615
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1994 and December 31, 1993
(Unaudited)
ASSETS
1994 1993
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Cash and cash equivalents $ 653,901 $ 591,618
Escrow deposits 573,841 685,647
Escrow deposits - restricted 83,556 191,502
Accounts and accrued interest receivable 86,066
Wrap-around note receivable 1,792,575 1,792,575
Deferred gain on sale (286,462) (286,462)
Deferred expenses, net of accumulated
amortization of $79,934 in 1994 and
$39,557 in 1993 516,648 557,025
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3,420,125 3,531,905
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Investment in real estate, at cost:
Land 1,325,898 1,325,898
Buildings and improvements 20,518,019 20,457,885
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21,843,917 21,783,783
Less accumulated depreciation 10,635,745 10,145,304
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Investment in real estate, net of
accumulated depreciation 11,208,172 11,638,479
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$ 14,628,297 $ 15,170,384
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LIABILITIES AND PARTNERS' CAPITAL
Loans payable - affiliate $ 417,775
Accounts payable $ 40,863 54,703
Due to affiliates 89,863 37,411
Accrued liabilities, principally
real estate taxes 401,826 534,542
Security deposits 106,721 116,151
Purchase price and mortgage notes payable 15,346,178 15,419,064
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Total liabilities 15,985,451 16,579,646
Partners' capital (30,005 Limited
Partnership Interests issued and
outstanding) (1,357,154) (1,409,262)
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$ 14,628,297 $ 15,170,384
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The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Income:
Rental and service $ 4,289,399 $ 3,926,566
Interest on short-term investments 21,019 11,316
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Total income 4,310,418 3,937,882
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Expenses:
Interest on purchase price and
mortgage notes payable 1,098,760 1,050,395
Interest on short-term loans
from affiliate 5,773 29,080
Depreciation 490,441 482,971
Amortization of deferred expenses 40,377 19,401
Property operating 1,752,887 1,731,566
Real estate taxes 396,323 359,414
Property management fees 215,512 194,300
Administrative 258,237 194,870
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Total expenses 4,258,310 4,061,997
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Net income (loss) $ 52,108 $ (124,115)
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Net income (loss) allocated to
General Partner $ 521 $ (1,241)
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Net income (loss) allocated to
Limited Partners $ 51,587 $ (122,874)
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Net income (loss) per Limited Partnership
Interest (30,005 issued and outstanding) $ 1.72 $ (4.09)
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The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Income:
Rental and service $ 1,466,902 $ 1,386,778
Interest on short-term investments 6,087 4,429
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Total income 1,472,989 1,391,207
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Expenses:
Interest on purchase price and
mortgage notes payable 365,611 368,179
Interest on short-term loans
from affiliate 578 4,352
Depreciation 159,564 160,991
Amortization of deferred expenses 13,459 12,133
Property operating 741,492 657,913
Real estate taxes 132,980 119,638
Property management fees 72,640 67,625
Administrative 75,842 66,510
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Total expenses 1,562,166 1,457,341
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Net loss $ (89,177) $ (66,134)
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Net loss allocated to General Partner $ (892) $ (661)
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Net loss allocated to Limited Partners $ (88,285) $ (65,473)
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Net loss per Limited Partnership Interest
(30,005 issued and outstanding) $ (2.94) $ (2.18)
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The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Operating activities:
Net income (loss) $ 52,108 $ (124,115)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation of properties 490,441 482,971
Amortization of deferred expenses 40,377 19,401
Net change in:
Escrow deposits - unrestricted 111,806 (271,973)
Escrow deposits - restricted (33,036) (20,991)
Accounts receivable (86,066)
Accounts payable (13,840) (66,382)
Due to affiliates 52,452 (10,951)
Accrued liabilities (132,716) 217,447
Security deposits (9,430) 12,509
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Net cash provided by
operating activities 472,096 237,916
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Investing activities:
Additions to properties (60,134) (87,677)
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Cash used in investing activities (60,134) (87,677)
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Financing activities:
Proceeds from issuance of mortgage
notes payable 12,350,000
Repayments of mortgage notes payable (10,025,572)
Repayment of loans payable - affiliate (417,775) (1,371,423)
Principal payments on purchase price
and mortgage notes payable (72,886) (109,054)
Funding of repair escrows (235,277)
Disbursements from escrow
deposits - restricted 140,982 62,383
Payment of deferred expenses (474,277)
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Net cash used in or provided by
financing activities (349,679) 196,780
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Net change in cash and cash equivalents 62,283 347,019
Cash and cash equivalents at beginning
of period 591,618 27,150
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Cash and cash equivalents at end of period $ 653,901 $ 374,169
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The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
A reclassification has been made to the previously reported 1993 statements in
order to provide comparability with the 1994 statements. This reclassification
has not changed the 1993 results. In the opinion of management, all adjustments
necessary for a fair presentation have been made to the accompanying statements
for the nine months and quarter ended September 30, 1994, and all such
adjustments are of a normal and recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1994 and 1993, the Partnership
incurred and paid interest expense on purchase price and mortgage notes payable
of $1,098,760 and $1,050,395, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1994 are:
Paid
--------------------
Nine Months Quarter Payable
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Property management fees $212,847 $71,558 $25,011
Reimbursement of expenses to
the General Partner, at cost:
Accounting 35,398 22,793 23,236
Data processing 10,335 4,965 12,638
Investor communications 13,293 8,560 7,220
Legal 4,556 2,934 3,579
Portfolio management 17,506 10,051 15,368
Other 5,825 3,751 2,811
As of December 31, 1993, the Partnership had short-term loans outstanding of
$417,775 from the General Partner, which were repaid during the nine months
ended September 30, 1994. The Partnership incurred interest expense of $5,773
and $29,080 and paid interest expense of $7,801 and $37,439 during the nine
months ended September 30, 1994 and 1993, respectively. Interest expense was
computed at the American Express Company cost of funds rate plus a spread to
cover administrative costs.
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Equity Properties Ltd.-VIII (the "Partnership") was formed in 1979 to
invest in and operate income-producing real property. The Partnership raised
$30,005,000 through the sale of Limited Partnership Interests and utilized
these proceeds to acquire thirteen real property investments. Eight of these
properties have been sold or have had title relinquished through foreclosure.
The Partnership continues to operate the five remaining properties.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1993 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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During 1994, the Partnership's properties experienced overall improvements in
net operations which was the primary reason the Partnership recognized net
income for the nine months ended September 30, 1994 when compared to a net loss
for the same period in 1993. However, increased property operating expenses at
the Cedar Creek - Phases I and II and Walnut Hills - Phases I and II apartment
complexes during the quarter ended September 30, 1994 caused the Partnership to
recognize a higher net loss for the quarter when compared to the same period in
1993. Further discussion of the Partnership's operations is summarized below.
1994 Compared to 1993
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Rental rates and/or average occupancy levels increased at all of the
Partnership's five properties resulting in increases in rental and service
income and property management fees during the nine months and quarter ended
September 30, 1994 as compared to the same periods in 1993.
Due to higher average cash balances and higher interest rates earned on short-
term investments, interest income on short-term investments increased during
the nine months and quarter ended September 30, 1994 as compared to the same
periods in 1993.
The outstanding short-term loans from the General Partner were largely repaid
during late 1993 and completely repaid during 1994, resulting in a decrease in
interest expense on short-term loans during the nine months and quarter ended
September 30, 1994 as compared to the same periods in 1993.
The Partnership incurred refinancing fees in connection with the May 1993
mortgage loan refinancings on the Cedar Creek - Phases I and II and Walnut
Hills - Phases I and II apartment complexes which are amortized over the lives
of the respective loans. As a result, amortization of deferred expenses
increased during the nine months and quarter ended September 30, 1994 as
compared to the same periods in 1993.
Property operating expense increased during the quarter ended September 30,
1994 as compared to the same period in 1993 primarily due to an increase in
consultant fees incurred in appealing the real estate tax assessments at the
Cedar Creek - Phases I and II and Walnut Hills - Phases I and II apartment
complexes.
As a result of increased property assessments received from taxing authorities
at the Cedar Creek - Phases I and II and Walnut Hills - Phases I and II
apartment complexes, real estate tax expense increased during the nine months
and quarter ended September 30, 1994 as compared to the same periods in 1993.
This increase was partially offset by a decrease in real estate taxes at the
Greentree Village Apartments due to a reduced property assessment.
Increased accounting fees and data processing costs resulted in an increase in
administrative expenses during the nine months and quarter ended September 30,
1994 as compared to the same periods in 1993.
Liquidity and Capital Resources
- -------------------------------
The cash or near cash position of the Partnership increased by approximately
$60,000 as of September 30, 1994 when compared to December 31, 1993. Operating
activities consisted primarily of cash flow generated from property operations,
which was partially offset by the payment of administrative expenses. This cash
flow was partially used to fund investing activities relating to property
improvements on the Cedar Creek - Phases I and II apartment complexes, and
financing activities, which included repayment of the short-term loans from the
General Partner and principal payments on purchase price and mortgage notes
payable. Financing activities also included the receipt of funds released from
the restricted escrow accounts of the Greentree Village apartment complex.
As of September 30, 1994, the Partnership had repaid its loans from the General
Partner in connection with funds advanced for working capital purposes. The
loans were repaid with available cash flow from property operations.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit is
considered to be significant if it exceeds $250,000 annually or 20% of the
property's rental and service income. During the nine months ended September
30, 1994, four of the Partnership's five properties generated positive cash
flow after debt service as compared to all five properties generating positive
cash flow during the same period in 1993. The Walnut Hills - Phase I Apartments
generated a marginal cash flow deficit in 1994 primarily due to an increase in
roof repair expense and increased debt service payments caused by an increase
in the outstanding loan balance resulting from the 1993 refinancing.
While the cash flow of the Partnership's properties has improved, the General
Partner continues to pursue actions aimed at further improving property
operating performance and seeking rent increases where market conditions allow.
In addition, the General Partner is reviewing the possibility of selling the
remaining properties. However, given certain restrictions on the existing
mortgage loans collateralized by the properties, this action would not be
possible until mid 1995.
The Partnership retained a 21.6% interest in the wrap-around note receivable
(the "Note") previously received by the Partnership as a portion of the selling
price of the Sherwood Lake Apartments. The purchaser of the property was unable
to make the balloon payment due under the Note at maturity in June 1991 and in
November 1991 filed for protection under the U.S. Bankruptcy Code. In December
1993, a liquidation plan was confirmed by the bankruptcy court. The plan allows
the purchaser until December 1994 to complete a sale or refinancing of the
property. The plan also requires that such sale or refinancing provide proceeds
sufficient to pay secured creditors $14,700,000, plus $35,000 for each month
commencing January 1994 through the earlier of December 1994 or the completion
of the sale or refinancing. If the property is sold or refinanced upon these
terms, the Partnership will recover all amounts due to it. In the event that
the purchaser does not sell or refinance the property by December 30, 1994, the
property will be conveyed to the majority participant on the loan, subject to
all mortgage liens. Upon a sale of the property by the majority participant,
the Partnership will not receive any proceeds until the majority participant
receives all amounts due under the Note and participation agreement.
Each of the Partnership's properties is owned through the use of third-party
mortgage loan financing and, therefore, the Partnership is subject to the
financial obligations required by such loans. As a result of the General
Partner's successful efforts to obtain refinancing of existing loans with new
lenders, the Partnership has no third-party financing which matures prior to
2002.
On November 4, 1994, The Balcor Company completed the sale of the assets of
Allegiance Realty Group, Inc. to an unaffiliated company, Insignia Allegiance
Management, Inc. ("Insignia"), which is based in Greenville, South Carolina. As
a result of this transaction, Insignia has assumed the management of the
Partnership's properties. This transaction is not expected to result in any
material change to the property management fees paid by the Partnership.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Certificate of Limited Partnership set forth as Exhibit 4 to Amendment
No. 2 to the Registrant's Registration Statement on Form S-11 dated
February 26, 1980 (Registration No. 2-63821) and Form of Confirmation regarding
Interests in the Registrant set forth as Exhibit 4.2 to the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1992 (Commission File No. 0-9541)
are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1994 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended September 30, 1994.
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.
BALCOR EQUITY PROPERTIES LTD.-VIII
By: /s/ Thomas E. Meador
----------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of BRI
Partners-79, the General Partner
By: /s/ Allan Wood
----------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer (Principal
Accounting and Financial Officer) of BRI
Partners-79, the General Partner
Date: November 10, 1994
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