UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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.)
2355 Waukegan Rd.
Bannockburn, IL 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
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Balcor Equity Properties Ltd.-VIII (the "Registrant") is a limited partnership
formed in 1979 under the laws of the State of Illinois. The Registrant raised
$30,005,000 from sales of Limited Partnership Interests. The Registrant's
operations consist exclusively of investment in and operation of
income-producing real property, and all information included in this report
relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire thirteen real
property investments. The Registrant has since disposed of eight of these
properties. As of December 31, 1995, the Registrant owned the five properties
described under "Item 2. Properties". The Partnership Agreement provides that
the proceeds of any sale or refinancing of the Registrant's properties will not
be reinvested in new acquisitions.
Overall, the investment real estate market saw gradual improvement over the
last year. This improvement has taken place in an environment of generally low
interest rates and little or no new supply, parameters which may not exist in
the next few years. Demand for real estate space, while projected to improve
in line with the overall economy, is also vulnerable to external forces. The
major challenges facing the real estate industry today include increased
international competition, corporate restructurings, new computer and
communications technologies, an aging population and potential revisions of
the tax code. In addition, the increased flow of capital to real estate through
new vehicles such as commercial mortgage-backed securities and REITs could spur
new construction at unsupportable levels, as well as impact existing property
values.
Operationally, existing apartment properties continued to register occupancy
percentages in the 90s, with average rents rising at an annual rate of between
3 and 4 percent. Apartments are still considered one of the top real estate
asset classes in terms of performance. However, some markets are experiencing
new construction of rental units which, if unrestrained, could impact the
performance of existing properties. Most of the new construction is aimed at
the two segments of the rental market which are growing the fastest: low-income
households and upper-income households who prefer to rent rather than own. Of
all the major asset classes, apartments typically display the least volatility
in terms of property values.
The General Partner had previously advised limited partners that its strategy
was to sell the Registrant's remaining assets over the next two to three years.
The General Partner also stated that the timing of the liquidation could be
lengthened or shortened due to changes in market conditions, economic factors,
interest rates and unforeseen events. Since November 1995, the General Partner
believes that the market for multifamily housing properties has become
increasingly favorable to sellers of these properties. This belief is based on
the results of the sales and marketing activities of the Registrant as
described below and based upon the similar results of such activities by
various other registrants affiliated with the Registrant. These favorable
market conditions are in part attributable to the increasing strength of the
capital markets and the re-entry of REITs into the acquisition market. Since
November 1995, the General Partner has entered into a letter of intent to sell
one of the Registrant's five remaining properties, and, if the market remains
<PAGE>
favorable, intends to begin actively marketing more of the remaining properties
for sale. If the current market conditions for sales remain favorable and the
General Partner can obtain appropriate sales prices, the Registrant's
liquidation strategy may be accelerated.
The Registrant received notice of an unsolicited offer for the purchase of
limited partnership interests ("tender offer") in August 1995. The tender offer
was made by Equity Resource Fund-XVII ("Equity Resources"). Equity Resources
stated that their primary motive in making the offer was to make a profit from
the purchase of the interests. Equity Resources acquired 2.8% of the total
interests outstanding in the Registrant pursuant to the tender offer. The
Registrant incurred administrative costs in responding to the tender offer.
The Registrant received notice of an unsolicited offer for the purchase of
limited partnership interests ("tender offer") in November 1995. The tender
offer was made by Walton Street Capital Acquisition Co. L.L.C. ("Walton
Street"). Walton Street stated that their primary motive in making the offer
was to make a profit from the purchase of the interests. Walton Street acquired
6.68% of the total interests outstanding in the Registrant and assigned the
interests to its affiliate, WIG VIII Partners. The Registrant incurred
administrative costs in responding to the tender offer.
The Registrant received notice of an unsolicited offer for the purchase of
limited partnership interests ("tender offer") on March 11, 1996. The tender
offer was made by Metropolitan Acquisition VII, L.C.C. ("Metropolitan").
Metropolitan is an affiliate of Insignia Financial Group, Inc., which provides
property management services to all five of the Registrant's properties.
Metropolitan has stated that their primary motive in making the offer is to
make a profit from the purchase of the interests. Metropolitan is seeking to
acquire up to 30% of the total interests outstanding in the Registrant. The
Registrant will incur administrative costs in responding to the tender offer
and may incur additional costs if additional tender offers are made in the
future. The General Partner cannot predict with any certainty what the impact
of this tender offer or any future tender offers will have on the operations or
management of the Registrant.
The Registrant, by virtue of its ownership of real estate is subject to Federal
and state laws and regulations covering various environmental issues.
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental issues and to conduct tests for
environmental contamination as appropriate. The General Partner is not aware of
any potential liability due to environmental issues or conditions that would be
material to the Registrant.
The officers and employees of BRI Partners-79, the General Partner of the
Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Item 2. Properties
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As of December 31, 1995, the Registrant owns the five properties described
below:
Location Description of Property
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<PAGE>
San Antonio, Texas Cedar Creek Apartment Complex - Phase I: a
176-unit apartment complex located on
approximately five acres.
San Antonio, Texas Cedar Creek Apartment Complex - Phase II: a
216-unit apartment complex located on
approximately six acres.
Colorado Springs, Colorado Greentree Village Apartment Complex: a 216-unit
apartment complex located on approximately eight
acres.
San Antonio, Texas Walnut Hills Apartment Complex - Phase I: a
192-unit apartment complex located on
approximately eight acres.
San Antonio, Texas Walnut Hills Apartment Complex - Phase II: a
232-unit apartment complex located on
approximately eight acres.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate investment properties.
Each of the properties is held subject to mortgages.
See Notes to Financial Statements for other information regarding real property
investments.
Item 3. Legal Proceedings
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Proposed class action
- ---------------------
On February 29, 1996, a proposed class action complaint was filed, Raymond
Masri vs. Lehman Brothers, Inc., et al., Case No. 96/103727 (Supreme Court of
the State of New York, County of New York). The Registrant, additional limited
partnerships which were sponsored by The Balcor Company, three limited
partnerships sponsored by the predecessor of Lehman Brothers, Inc. (together
with the Registrant and the affiliated partnerships, the "Defendant
Partnerships"), Lehman Brothers, Inc. and Smith Barney Holdings, Inc. are
defendants. The complaint alleges, among other things, common law fraud and
deceit, negligent misrepresentation and breach of fiduciary duty relating to
the disclosure of information in the offering of limited partnership interests
in the Defendant Partnerships. The complaint seeks judgment for compensatory
damages equal to the amount invested in the Defendant Partnerships by the
proposed class plus interest accrued thereon; general damages for injuries
arising from the defendants' actions; recovery from the defendants of all
profits received by them as a result of their actions relating to the Defendant
Partnerships; exemplary damages; attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. Management of each of the defendants believes they
have meritorious defenses to contest the claims. It is not determinable at this
time whether or not an unfavorable decision in this action would have a
material adverse impact on the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1995.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
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Matters
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There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop; therefore, the
market value of the Limited Partnership Interests cannot reasonably be
determined. For information regarding distributions, see Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources.
As of December 31, 1995, the number of record holders of Limited Partnership
Interests of the Registrant was 3,042.
Item 6. Selected Financial Data
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Year ended December 31,
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1995 1994 1993 1992 1991
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Total income $6,043,472 $6,175,042 $5,290,545 $5,336,906 $5,129,643
Income (loss)
before gain
on sale of
property and
extraordinary
item 135,417 414,158 (327,499) (567,448) (679,607)
Net income (loss) 135,417 700,620 (327,499) 31,753 (679,607)
Net income (loss)
per LPI 4.47 23.12 (10.81) 1.05 (22.42)
Total assets 12,335,453 15,387,316 15,170,384 14,278,492 16,312,664
Mortgage notes
payable 15,212,762 15,320,720 15,419,064 13,226,872 14,570,999
Distributions
per LPI 100.57(A) None None None None
(A) This amount includes a distribution of original capital of $59.74 per
Limited Partnership Interest.
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Operations
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Summary of Operations
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<PAGE>
During 1994, Balcor Equity Properties Ltd. - VIII (the "Partnership") received
a repayment of its interest in the Sherwood Lake Apartments wrap-around note
receivable and recognized the previously deferred gain. As a result, net income
decreased during 1995 as compared to 1994 and the Partnership recognized net
income during 1994 as compared to a net loss during 1993. Further discussion of
the Partnership's operations is summarized below.
1995 Compared to 1994
- ---------------------
Due to higher average cash balances, primarily from the Sherwood Lakes
Apartments wrap-around note receivable repayment received in November 1994, and
higher interest rates earned on short-term investments, interest income on
short-term investments increased during 1995 as compared to 1994.
During November 1994, the Partnership's interest in Sherwood Lakes Apartments
wrap-around note receivable was repaid. As a result of this repayment, the
Partnership recognized interest income on wrap-around note receivable as well
as the previously deferred gain on sale of property.
The outstanding short-term loans from the General Partner were repaid during
1994. Prior to this repayment, the Partnership recognized interest expense on
short-term loans during 1994.
The Partnership incurred non-recurring legal, consulting, printing and postage
costs in connection with two tender offers during 1995. As a result,
administrative expenses increased during 1995 as compared to 1994.
1994 Compared to 1993
- ---------------------
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 1994 as compared to 1993.
Due to higher average cash balances, primarily from the Sherwood Lakes
repayment and higher interest rates earned on short-term investments, interest
income on short-term investments increased during 1994 as compared to 1993.
As a result of the Sherwood Lakes Apartments wrap-around note receivable
repayment in November 1994, the Partnership recognized interest income on
wrap-around note receivable and the previously deferred gain on sale of
property. No interest income was recognized in 1993 since the wrap-around note
receivable had been placed on non-accrual status. For non-accrual loans, income
is recorded only as cash payments are received from the purchaser.
The outstanding short-term loan from the General Partner was repaid during
1994, resulting in a decrease in interest expense on short-term loans during
1994 as compared to 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 term
of the respective loan agreements. As a result, amortization of deferred
expenses increased during 1994 as compared to 1993.
<PAGE>
Increased accounting and portfolio management fees and data processing costs
resulted in an increase in administrative expenses during 1994 as compared to
1993.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased as of December 31, 1995 when
compared to December 31, 1994. Operating activities include cash flow from the
property operations and short-term investments, which was partially offset by
the payment of administrative expenses. Financing activities consisted
primarily of a distribution to the Limited Partners, and principal payments on
mortgage notes payable.
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 significant if it exceeds $250,000 annually or 20% of the property's
rental and service income. The Partnership defines cash flow generated from its
properties as an amount equal to the property's revenue receipts less property
related expenditures, which include debt service payments. During 1995 and
1994, four of the Partnership's five properties generated positive cash flow.
The Walnut Hills - Phase I Apartments generated a marginal cash flow deficit
during 1995 and 1994; however, the combined property operations of the Walnut
Hills - Phase I and Phase II apartment complexes generated positive cash flow
during the same periods.
While the cash flow of certain of the Partnership's properties has improved,
the General Partner continues to pursue a number of actions aimed at improving
the cash flow of the Partnership's properties, improving operating performance,
and seeking rent increases where market conditions allow.
The General Partner had previously advised limited partners that its strategy
was to sell the Partnership's remaining assets over the next two to three
years. The General Partner also stated that the timing of the liquidation
could be lengthened or shortened due to changes in market conditions, economic
factors, interest rates and unforeseen events. Since November 1995, the
General Partner believes that the market for multifamily housing properties has
become increasingly favorable to sellers of these properties. This belief is
based on the results of the sales and marketing activities of the Partnership
as described below and based upon the similar results of such activities by
various other partnerships affiliated with the Partnership. These favorable
market conditions are in part attributable to the increasing strength of the
capital markets and the re-entry of REITs into the acquisition market. Since
November 1995, the General Partner has entered into a letter of intent to sell
one of the Partnership's five remaining properties, and, if the market remains
favorable, intends to begin actively marketing more of the remaining properties
for sale. If the current market conditions for sales remain favorable and the
General Partner can obtain appropriate sales prices, the Partnership's
liquidation strategy may be accelerated.
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. See Note 5 of Notes to Financial
Statements for information concerning outstanding balances, maturity dates,
interest rates and terms related to each of these mortgage loans. As a result
of the General Partner's efforts to obtain refinancing of existing loans with
<PAGE>
new lenders, the Partnership has no third-party financing which matures prior
to 2002.
The Partnership made a distribution of $100.57 per Interest in October 1995.
This distribution reflects the resumption by the Partnership of distributions
from Net Cash Receipts, a special distribution of $59.74 per Interest from Net
Cash Proceeds related to the receipt by the Partnership of the repayment of its
interest in a purchase money note received upon the sale of the Sherwood Lakes
Apartments and a special distribution of $33.33 per Interest from Net Cash
Receipts reserves.
In January 1996, the Partnership paid a distribution of $225,038 ($7.50 per
Interest) to the holders of Limited Partnership Interests representing the
quarterly distribution from Net Cash Receipts for the fourth quarter of 1995.
Including the January 1996 distribution, Limited Partners have received
distributions of Net Cash Receipts of $173.33 and Net Cash Proceeds of $142.24,
totaling $315.57 per $1,000 Interest, as well as certain tax benefits. The
Partnership does not anticipate that it will pay a distribution for the first
quarter of 1996. In light of results to date and current market conditions, the
General Partner does not anticipate that investors will recover all of their
original investment.
In 1995, the Financial Accounting Standards Board issued Statement No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" which establishes accounting standards for impairment of
long-lived assets and long-lived assets to be disposed of. This statement has
been adopted by the Partnership as of January 1, 1995, and did not have a
material impact on the financial position or results of operations of 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 sale 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.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
See Index to Financial Statements and Financial Statement Schedule in this Form
10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
The net effect of the differences between the financial statements and the tax
return is summarized as follows:
December 31, 1995 December 31, 1994
----------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
---------- ---------- ----------- --------
Total assets $12,335,453 $14,268,357 $15,387,316 $17,613,469
Partners' (deficit)
<PAGE>
capital accounts:
General Partner (224,045) (181,585) (225,399) (220,802)
Limited Partners (3,366,783) (1,476,343) (483,243) 1,738,312
Net income (loss):
General Partner 1,354 39,217 7,006 349,105
Limited Partners 134,063 (197,052) 693,614 (362,706)
Per Limited Part-
nership Interest 4.47 6.57 23.12 (12.09)
Item 9. Changes in and Disagreements with Accountants on Accounting and
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Financial Disclosure
- --------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
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(a) Neither the Registrant nor BRI Partners-79, its General Partner, has a
Board of Directors.
(b, c & e) The names, ages and business experiences of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
----- --------
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Vice President Josette V. Goldberg
Senior Vice President Alan G. Lieberman
Senior Vice President, Chief Brian D. Parker
Financial Officer, Treasurer
and Assistant Secretary
Senior Vice President John K. Powell, Jr.
Thomas E. Meador (July 1947) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a Director of The Balcor Company. He is
also Senior Vice President of American Express Company and is responsible for
its real estate operations worldwide. Prior to joining Balcor, Mr. Meador was
employed at the Harris Trust and Savings Bank in the commercial real estate
division where he was involved in various lending activities. Mr. Meador
received his M.B.A. degree from the Indiana University Graduate School of
Business.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and is
responsible for due diligence analysis and real estate advisory services for
Balcor and American Express Company. He also has supervisory responsibility for
Balcor's environmental matters. Mr. Darragh received masters' degrees in Urban
Geography from Queen's University and in Urban Planning from Northwestern
University.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary
responsibility for all human resources matters. In addition, she has
supervisory responsibility for Balcor's MIS functions. Ms. Goldberg has been
designated as a Senior Human Resources Professional (SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
Balcor's property sales and capital markets functions. Mr. Lieberman is a
Certified Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and, as Chief Financial
Officer and Chief Accounting Officer, is responsible for Balcor's financial,
legal and treasury functions. He is a Director of The Balcor Company. Mr.
Parker is a Certified Public Accountant and holds an M.S. degree in Accountancy
from DePaul University.
<PAGE>
John K. Powell Jr. (June 1950) joined Balcor in September 1985 and is
responsible for portfolio and asset management matters relating to Balcor's
partnerships. Mr. Powell also has supervisory responsibility for Balcor's risk
management and investor services functions. He received a Master of Planning
degree from the University of Virginia. Mr. Powell has been designated a
Certified Real Estate Financier by the National Society for Real Estate Finance
and is a full member of the Urban Land Institute.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1995.
Item 11. Executive Compensation
- -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of BRI Partners-79, the General Partner.
Certain of these officers receive compensation from The Balcor Company (but not
from the Registrant) for services performed for various affiliated entities,
which may include services performed for the Registrant. However, the General
Partner believes that any such compensation attributable to services performed
for the Registrant is immaterial to the Registrant. See Note 8 of Notes to
Financial Statements for the information relating to transactions with
affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
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(a) The following entity is the sole Limited Partner which owns beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant:
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Title of Class Owner Ownership Class
- -----------------------------------------------------------------------------
Limited WIG VIII 2,005.5 6.68%
Partnership Partners Limited
Interests Chicago, Partnership
Illinois Interests
(b) Neither BRI Partners-79 nor its officers or partners own any Limited
Partnership Interests of the Registrant.
Relatives and affiliates of the partners and officers of the General Partner do
not own any additional interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
<PAGE>
- -------------------------------------------------------
(a & b) See Note 3 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 8 of Notes to Financial Statements for information relating to
transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
- -------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements and Financial Statement Schedule in
this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement of Limited Partnership previously filed
as Exhibit 2(a) to Amendment No. 5 to the Registrant's Registration Statement
on Form S-11 dated July 16, 1980 (Registration No. 2-63821) is incorporated
herein by reference.
(4) Certificate of Limited Partnership set forth as Exhibit 2(b) to Amendment
No. 4 to the Registrant's Registration Statement on Form S-11 dated July 8,
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 1995 is attached hereto.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter
ended December 31, 1995.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedule: See Index to Financial Statements and
Financial Statement Schedule in this Form 10-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, 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/Brian D. Parker
-----------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of BRI Partners-79, the General Partner
Date: March 28, 1996
--------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------------------- ------------------------------- ------------
President and Chief Executive
Officer (Principal Executive
Officer) of BRI Partners-79,
/s/Thomas E. Meador the General Partner March 28, 1996
- -------------------- --------------
Thomas E. Meador
Senior Vice President, and Chief
Financial Officer (Principal
Accounting and Financial
Officer) of BRI Partners-79, the
/s/Brian D. Parker General Partner March 28, 1996
- -------------------- --------------
Brian D. Parker
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1995 and 1994
Statements of Partners' Deficit, for the years ended December 31, 1995, 1994
and 1993
Statements of Income and Expenses, for the years ended December 31, 1995, 1994
and 1993
Statements of Cash Flows, for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1995
Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Equity Properties Ltd.-VIII:
We have audited the financial statements and the financial statement schedule
of Balcor Equity Properties Ltd.-VIII (An Illinois Limited Partnership) as
listed in the index of this Form 10-K. These financial statements and the
financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Equity Properties
Ltd.-VIII at December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles. In addition,
in our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 20, 1996
<PAGE>
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
1995 1994
------------- -------------
Cash and cash equivalents $ 542,128 $ 2,988,843
Escrow deposits - unrestricted 803,873 724,015
Escrow deposits - restricted 94,709 94,352
Accounts and accrued interest receivable 839 33,711
Prepaid expenses 63,360
Deferred expenses, net of accumulated
amortization of $147,229 in 1995 and
$93,393 in 1994 449,353 503,189
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1,954,262 4,344,110
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Investment in real estate:
Land 1,325,898 1,325,898
Buildings and improvements 20,518,019 20,518,019
------------- -------------
21,843,917 21,843,917
Less accumulated depreciation 11,462,726 10,800,711
------------- -------------
Investment in real estate, net of
accumulated depreciation 10,381,191 11,043,206
------------- -------------
$ 12,335,453 $ 15,387,316
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable $ 45,964 $ 77,177
Due to affiliates 19,344 49,347
Accrued liabilities, principally
real estate taxes 551,280 548,122
Security deposits 96,931 100,592
Mortgage notes payable 15,212,762 15,320,720
------------- -------------
Total liabilities 15,926,281 16,095,958
Limited Partners' deficit (30,005
Interests issued and outstanding) (3,366,783) (483,243)
General Partner's deficit (224,045) (225,399)
----------- -----------
Total partner's deficit (3,590,828) (708,642)
------------- -------------
$ 12,335,453 $ 15,387,316
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' DEFICIT
for the years ended December 31, 1995, 1994 and 1993
Partners' Deficit Accounts
--------------------------------------------
General Limited
Total Partner Partners
------------- ------------ ---------------
Balance at December 31, 1992 $ (1,081,763) $ (229,130) $ (852,633)
Net loss for the year
ended December 31, 1993 (327,499) (3,275) (324,224)
------------- ------------ ---------------
Balance at December 31, 1993 (1,409,262) (232,405) (1,176,857)
Net income for the year
ended December 31, 1994 700,620 7,006 693,614
------------- ------------ ---------------
Balance at December 31, 1994 (708,642) (225,399) (483,243)
Cash distributions (A) (3,017,603) (3,017,603)
Net income for the year
ended December 31, 1995 135,417 1,354 134,063
------------- ------------ ---------------
Balance at December 31, 1995 $ (3,590,828) $ (224,045) $ (3,366,783)
============= ============ ===============
(A) A distribution of $100.57 per Limited Partnership
Interest was made in the fourth quarter of 1995.
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
------------- ------------ ---------------
Income:
Rental and service $ 5,861,649 $ 5,724,364 $ 5,271,564
Interest on short-term
investments 181,823 43,253 18,981
Interest on wrap-around
note receivable 407,425
------------- ------------ ---------------
Total income 6,043,472 6,175,042 5,290,545
------------- ------------ ---------------
Expenses:
Interest on mortgage notes
payable 1,448,914 1,463,776 1,419,454
Interest on short-term
loans from affiliate 5,773 38,845
Depreciation 662,015 655,407 648,503
Amortization of deferred
expenses 53,836 53,836 32,860
Property operating 2,478,862 2,424,097 2,398,046
Real estate taxes 555,297 545,503 534,618
Property management fees 279,931 286,031 262,846
Administrative 429,200 326,461 282,872
------------- ------------ ---------------
Total expenses 5,908,055 5,760,884 5,618,044
------------- ------------ ---------------
Income (loss) before gain
on sale of property 135,417 414,158 (327,499)
Gain on sale of property 286,462
------------- ------------ ---------------
Net income (loss) $ 135,417 $ 700,620 $ (327,499)
============= ============ ===============
Net income (loss) allocated
to General Partner $ 1,354 $ 7,006 $ (3,275)
============= ============ ===============
Net income (loss) allocated
to Limited Partners $ 134,063 $ 693,614 $ (324,224)
============= ============ ===============
Net income (loss) per Limited
Partnership Interest
(30,005 issued and
outstanding) $ 4.47 $ 23.12 $ (10.81)
============= ============ ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
------------- ------------ ---------------
Operating activities:
Net income (loss) $ 135,417 $ 700,620 $ (327,499)
Adjustments to reconcile
net income (loss)to net
cash provided by
operating activities:
Gain on sale of property (286,462)
Depreciation of properties 662,015 655,407 648,503
Amortization of deferred
expenses 53,836 53,836 32,860
Net change in:
Escrow deposits -
unrestricted (79,858) (138,271) (373,551)
Escrow deposits -
restricted (42,817) (12,672) (30,839)
Accounts and accrued
interest receivable 32,872 (33,711)
Prepaid expenses (63,360)
Accounts payable (31,213) 22,474 (11,679)
Due to affiliates (30,003) 11,936 (8,996)
Accrued liabilities 3,158 13,580 393,159
Security deposits (3,661) (15,559) 16,680
------------- ------------ ---------------
Net cash provided by
operating activities 636,386 971,178 338,638
------------- ------------ ---------------
Investing activities:
Additions to properties (60,134) (133,077)
Proceeds from wrap-around
note receivable 1,792,575
------------ ---------------
Net cash provided by or used
in investing activities 1,732,441 (133,077)
------------ ---------------
Financing activities:
Proceeds from issuance of
mortgage notes payable 12,350,000
Payments of mortgage notes
payable (10,025,572)
Repayment of loans payable-
affiliate (417,775) (1,361,965)
Principal payments on
mortgage notes payable (107,958) (98,344) (132,236)
Funding of repair escrows (235,277)
Releases of repair escrows 99,903 135,374
Releases of escrow deposits
- restricted 42,460 109,822 102,860
Payment of deferred expenses (474,277)
Distributions to Limited
Partners (3,017,603)
------------- ------------ ---------------
Net cash used in or
provided by financing
activities (3,083,101) (306,394) 358,907
------------- ------------ ---------------
Net change in cash and cash
equivalents (2,446,715) 2,397,225 564,468
Cash and cash equivalents at
beginning of period 2,988,843 591,618 27,150
------------- ------------ ---------------
Cash and cash equivalents at
end of period $ 542,128 $ 2,988,843 $ 591,618
============= ============ ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Partnership's Business:
Balcor Equity Properties Ltd.-VIII is engaged principally in the operation of
residential real estate located in Texas and Colorado.
2. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) Depreciation expense is computed using straight-line and accelerated
methods. Rates used in the determination of depreciation are based upon the
following estimated useful lives:
Buildings and improvements 15 to 33 years
Furniture and fixtures 3 to 5 years
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account.
As properties are sold, the related costs and accumulated depreciation are
removed from the respective accounts. Any gain or loss on disposition is
recognized in accordance with generally accepted accounting principles.
Deferred gains on the sales of properties result from sales recorded under the
installment method. Gains are recognized based on the gross profit percentage
as future sales proceeds are collected.
(c) Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of". Under SFAS 121, the
Partnership records its investments in real estate at the lower of cost or fair
value, and periodically assesses, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimates the fair value of its properties by dividing the property's
expected net operating income by a risk adjusted rate of return which considers
economic and demographic conditions in the market. In the event the General
Partner determines an impairment in value has occurred, and the carrying amount
of the real estate asset will not be recovered, a provision is recorded to
reduce the carrying basis of the property to its estimated fair value. The
General Partner considers the method referred to above to result in a
reasonable measurement of a property's fair value, unless other factors
affecting the property's value indicate otherwise.
(d) Deferred expenses consist of loan refinancing fees which are amortized over
the terms of the respective agreements.
(e) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
<PAGE>
information about financial instruments for which it is practicable to estimate
that value. Since quoted market prices are not available for the Partnership's
financial instruments, fair values have been based on estimates using present
value techniques. These techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, may not be realized in
immediate settlement of the instrument. Statement No. 107 does not apply to all
balance sheet items and excludes certain financial instruments and all
non-financial instruments such as real estate from its disclosure requirements.
(f) Cash and cash equivalents include all unrestricted, highly liquid
investments with an original maturity of three months or less.
(g) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles.
(h) The Partnership is not liable for Federal income taxes and each Partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(i) Several reclassifications have been made to the previously reported 1994
and 1993 financial statements to conform with the classifications used in 1995.
These reclassifications have not changed the 1994 and 1993 results.
3. Partnership Agreement:
The Partnership was organized in February 1979. The Partnership Agreement
provides for BRI Partners-79 to be the General Partner and for the admission of
Limited Partners through the sale of up to 30,005 Limited Partnership Interests
at $1,000 per Interest, all of which were sold on or prior to October 31, 1980,
the termination date of the offering.
The Partnership Agreement provides that the General Partner will be allocated
1% of the profits and losses. To the extent Net Cash Receipts are distributed,
the General Partner will be entitled to 10% of the Net Cash Receipts (9% being
its management fee and 1% being its distributive share), which payment is
subordinated to certain levels of return to holders of Interests as specified
by the Partnership Agreement. There have been no cash payments made to the
General Partner under these provisions.
When and as the Partnership sells or refinances properties, the Net Cash
Proceeds resulting therefrom which are available for distribution will be
distributed only to holders of Interests until such time as holders of
Interests have received an amount equal to their Original Capital plus certain
levels of return, as specified by the Partnership Agreement. Only after such
returns are made to the Limited Partners would the General Partner receive 15%
of further distributed Net Cash Proceeds. There have been no cash payments made
to the General Partner under these provisions.
4. Wrap-around Note Receivable:
In January 1988, the Partnership sold (subject to the underlying debt
obligations) the wrap-around note receivable previously received by the
Partnership as a portion of the selling price of the Sherwood Lake Apartments.
At closing, the Partnership retained a 21.6% interest in the note pursuant to
<PAGE>
the terms of a participation agreement entered into by the Partnership and the
purchaser of the note.
The purchaser of the property failed to make the balloon payment due in June
1991. As a result, foreclosure proceedings were commenced and shortly
thereafter the purchaser of the property filed for protection under the U.S.
Bankruptcy Code. In December 1993, a liquidation plan was confirmed by the
bankruptcy court. In November 1994, the Partnership received $2,200,000
representing its participation in the wrap-around note. The repayment consisted
of the Partnership's share of the principal balance of the note of $1,792,575
and interest income of $407,425. The Partnership also recognized a $286,462
deferred gain on sale.
5. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1995 and 1994 consisted of the
following:
Carrying Carrying Current Final
Property Amount of Amount of Inter- Matur- Current Estimated
Pledged as Notes at Notes at est ity Monthly Balloon
Collateral 12/31/95 12/31/94 Rate Date Payment Payment
- ----------- ----------- ---------- ------- ------- -------- -------
Apartment Complexes:
Cedar Creek
Phase I $ 2,333,156 $ 2,350,562 9.38% 2003 $19,763 $2,138,000
Cedar Creek
Phase II 2,775,228 2,795,931 9.38% 2003 23,507 2,543,000
Greentree Village 3,083,359 3,099,604 9.75% 2026 26,479 None
Walnut Hills
Phase I 5,125,345 5,164,476 9.26% 2002 42,977 4,767,000
Walnut Hills
Phase II 1,895,674 1,910,147 9.26% 2002 15,896 1,763,000
----------- -----------
Total $15,212,762 $15,320,720
=========== ===========
All of the Partnership's loans described above require current monthly payments
of principal and interest.
Real estate with an aggregate carrying value of $10,381,191 at December 31,
1995 was pledged as collateral for repayment of mortgage loans.
Future annual maturities of the above mortgage notes payable during each of the
next five years are approximately as follows :
1996 $ 119,000
1997 130,000
1998 143,000
1999 157,000
2000 172,000
During the years ended December 31, 1995, 1994 and 1993, the Partnership
incurred and paid interest expense on mortgage notes payable of $1,448,914,
$1,463,776 and $1,419,454, respectively.
<PAGE>
6. Management Agreements:
As of December 31, 1995, all of the properties owned by the Partnership are
under management agreements with a third-party management company. These
management agreements provide for annual fees of 5% of gross operating
receipts.
7. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder, and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, will differ from the
tax returns due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net income for 1995 in the financial statements is $293,252 higher than the
tax loss of the Partnership for the same period.
8. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------- ------ ------- ------ ------- -------
Property management fees None None $283,313 None $263,313 $22,346
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $34,886 $3,244 50,895 $18,653 47,708 3,941
Data processing 21,180 2,454 23,660 4,773 13,598 2,824
Investor communica-
tions 5,217 None 17,584 4,864 17,915 1,480
Legal 15,472 2,769 6,703 3,202 6,139 507
Portfolio management 63,955 10,531 27,997 15,353 28,449 3,637
Other 1,994 346 18,156 2,502 7,851 648
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program; however, the General Partner is reimbursed
for expenses. The Partnership paid premiums to the deductible insurance program
of $35,119, $49,714 and $25,901 for 1995, 1994 and 1993, respectively.
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed all
of the Partnership's properties until the affiliate was sold to a third-party
in November 1994.
As of December 31, 1993, the Partnership had loans from the General Partner
totaling $417,775, which were repaid during 1994 with cash flow available from
property operations. The Partnership incurred interest expense of $5,773 and
<PAGE>
$38,845, and paid interest expense of $7,801 and $46,898 in 1994 and 1993,
respectively, on these loans.
9. Fair Values of Financial Instruments:
The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1995 are as follows:
The carrying value of cash and cash equivalents, accounts and accrued interest
receivable, accounts payable and restricted escrow deposits approximates fair
value.
Based on borrowing rates available to the Partnership at the end of 1995 for
mortgage loans with similar terms and maturities, the fair value of the
mortgage notes payable approximates the carrying value.
10. Subsequent Events:
(a) In January 1996, the Partnership paid $225,038 to Limited Partners
representing the quarterly distribution of available Net Cash Receipts of $7.50
per Interest for the fourth quarter of 1995.
(b) On February 29, 1996, a proposed class action complaint was filed, Raymond
Masri vs. Lehman Brothers, Inc., et al., Case No. 96/103727 (Supreme Court of
the State of New York, County of New York). The Partnership, additional limited
partnerships which were sponsored by The Balcor Company, three limited
partnerships sponsored by the predecessor of Lehman Brothers, Inc. (together
with the Partnership and the affiliated partnerships, the "Defendant
Partnerships"), Lehman Brothers, Inc. and Smith Barney Holdings, Inc. are
defendants. The complaint alleges, among other things, common law fraud and
deceit, negligent misrepresentation and breach of fiduciary duty relating to
the disclosure of information in the offering of limited partnership interests
in the Defendant Partnerships. The complaint seeks judgment for compensatory
damages equal to the amount invested in the Defendant Partnerships by the
proposed class plus interest accrued thereon; general damages for injuries
arising from the defendants' actions; recovery from the defendants of all
profits received by them as a result of their actions relating to the Defendant
Partnerships; exemplary damages; attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. Management of each of the defendants believes they
have meritorious defenses to contest the claims. It is not determinable at
this time whether or not an unfavorable decision in this action would have a
material adverse impact on the Partnership.
<PAGE>
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1995
<CAPTION>
Col. A Col. B Col. C Col. D
- --------------------- -------- -------------------- ---------------------------------
Initial Cost Cost Adjustments
to Partnership Subsequent to Acqusition
-------------------- ---------------------------------
Buildings Carrying Reduction
Encum- and Im- Improve- Costs of Basis
Description brances Land provements ments (a) (b)
- --------------------- ------- -------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cedar Creek Apts./I,
176-units in
San Antonio, TX (e) $ 196,020 $ 4,591,190 $ 94,448 $ 6,801 ($1,299,826)
Cedar Creek Apts./II,
216-units in San
Antonio, TX (e) 300,000 6,189,358 59,907 9,336 (1,680,893)
Greentree Village
Apts., 216-units in
Colorado Springs, CO (g) (e) 395,800 5,564,212 250,877 10,680 None
Walnut Hills Apts./I,
192-units in San
Antonio, TX (e) 247,228 3,314,879 82,225 15,728 (347,203)
Walnut Hills Apts./II,
232-units in San
Antonio, TX (e) 372,576 3,764,901 92,722 15,748 (402,797)
---------- ----------- -------- ------- ------------
Total $1,511,624 $23,424,540 $580,179 $58,293 ($3,730,719)
========== =========== ======== ======= ============
See Notes (a) through (i) following.
</TABLE>
<PAGE>
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1995
(Continued)
<CAPTION>
Col. A Col. E Col. F Col. G Col. H Col. I
- ------------------- -------------------------------- -------- -------- ------ --------------
Gross Amounts at Which Life Upon
Carried at Close of Period Which Depre-
-------------------------------- ciation in
Buildings Accumulated Date Date Latest Income
and Im- Total Deprecia- of Con- Acq- Statement
Description Land provements (c)(d) tion(c) truction uired is Computed
- ------------------- --------------------- ------------ --------------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cedar Creek Apts./I,
176-units in
San Antonio, TX $143,150 $3,445,483 $3,588,633 $2,136,070 1978 4/07/81 (f)
Cedar Creek Apts./II,
216-units in San
Antonio, TX 222,714 4,654,994 4,877,708 2,834,985 1979 4/07/81 (f)
Greentree Village
Apts., 216-units in
Colorado Springs, CO (g) 396,747 5,824,822 6,221,569 3,662,696 (h) 11/06/80 (f)
Walnut Hills Apts./I,
192-units in San
Antonio, TX 224,767 3,088,090 3,312,857 1,415,181 1979 11/04/86(i) (f)
Walnut Hills Apts./II,
232-units in San
Antonio, TX 338,520 3,504,630 3,843,150 1,413,794 1980 11/04/86(i) (f)
---------- ----------- ----------- -----------
Total $1,325,898 $20,518,019 $21,843,917 $11,462,726
========== =========== =========== ===========
</TABLE>
<PAGE>
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
NOTES TO SCHEDULE III
(a) Consists of legal fees, appraisal fees, title costs and other related
professional fees.
(b) Guaranteed income earned on properties under the terms of certain
management and guarantee agreements was recorded by the Partnership as a
reduction of the basis of the property to which the guaranteed income related.
(c)Reconciliation of Real Estate
--------------------------------
1995 1994 1993
---------- ---------- ----------
Balance at beginning of year $21,843,917 $21,783,783 $21,650,706
Additions during year:
Improvements None 60,134 133,077
Deductions during year:
Foreclosure of investment
property None None None
----------- ----------- -----------
Balance at end of year $21,843,917 $21,843,917 $21,783,783
=========== =========== ===========
Reconciliation of Accumulated Depreciation
------------------------------------------
1995 1994 1993
---------- ---------- ----------
Balance at beginning of year $10,800,711 $10,145,304 $9,496,801
Depreciation expense for the
year 662,015 655,407 648,503
Accumulated depreciation of
foreclosed investment
property None None None
----------- ----------- -----------
Balance at end of year $11,462,726 $10,800,711 $10,145,304
=========== =========== ===========
(d) The aggregate cost of land for Federal income tax purposes is $1,627,607
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $10,133,138. The total of these is $11,760,745.
(e) See description of mortgage notes payable in Note 5 of Notes to Financial
Statements.
(f) Depreciation expense is computed based upon the following estimated useful
lives:
Buildings and improvements 15 to 33 years
Furniture and fixtures 3 to 5 years
(g) The Greentree Village Apartments cash balance is restricted due to
provisions of the HUD financing agreement.
(h) This apartment complex was completed in stages from 1971 to 1979.
(i) During 1986, these properties were acquired at a foreclosure sale.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 542
<SECURITIES> 0
<RECEIVABLES> 1
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 543
<PP&E> 21844
<DEPRECIATION> 11463
<TOTAL-ASSETS> 12335
<CURRENT-LIABILITIES> 714
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (3591)
<TOTAL-LIABILITY-AND-EQUITY> 12335
<SALES> 0
<TOTAL-REVENUES> 6044
<CGS> 0
<TOTAL-COSTS> 3314
<OTHER-EXPENSES> 1145
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1449
<INCOME-PRETAX> 135
<INCOME-TAX> 0
<INCOME-CONTINUING> 135
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135
<EPS-PRIMARY> 4.47
<EPS-DILUTED> 4.47
</TABLE>
