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, 1996
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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
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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 nine of these
properties. As of December 31, 1996, the Registrant owned the four 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.
The Registrant's properties are subject to certain competitive conditions in
the markets in which they are located. See Item 7. Liquidity and Capital
Resources for additional information.
The Registrant's remaining properties face various levels of competition for
retention of their tenants from similar types of properties in the vicinities
in which they are located. The Registrant has no plans to change the current
use of or to renovate any of its remaining properties.
Real estate values, especially for good quality, well located property,
increased significantly during 1996 due to a combination of readily available
capital, low interest rates, and decreased vacancy rates resulting from steady
demand and an acceptable level of new construction. While 1996 proved to be an
excellent year to sell real estate, projected yields by buyers on new
acquisitions have declined significantly due to competition and rising prices.
Although there will be variances by asset class and geographic area, the
investment climate is expected to remain strong for 1997. However, values could
begin to level off as they approach replacement cost triggering new
construction and an increase in capitalization rates.
The investment market for apartments was excellent during 1996 due to a number
of factors. Investor interest was strong, driven primarily by institutions, as
Real Estate Investment Trusts aggressively expanded their portfolios and
pension funds viewed apartments as an attractive asset class due to their
perceived low volatility and the emergence of large professional property
management companies. Operationally, existing apartment properties registered
on a national basis occupancy in the mid 90's and rental rate increases of 3-4%
in 1996. While above the rate of inflation, the rate of rental growth in 1996
was below that of the previous two years suggesting that the apartment cycle
may have plateaued, especially as the impact of new construction in many areas
is being felt. While 1997 is projected to be another solid year, values should
begin to level off as capitalization rates move upward continuing a trend which
began during the second half of 1996.
<PAGE>
During August 1996, the Registrant sold the Greentree Village apartment complex
in an all cash sale for $8,800,000. See Item 7. "Liquidity and Capital
Resources" for additional information. Currently, the Registrant is actively
marketing the remaining properties in its portfolio.
The timing of the termination of the Registrant and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. Such contingencies may include legal and other fees
stemming from litigation involving the Registrant including, but not limited
to, the lawsuits discussed in "Item 3. Legal Proceedings". In the absence of
any contingency, the reserves will be paid within twelve months of the last
property being sold. In the event a contingency exists, reserves may be held by
the Registrant for a longer period of time.
Activity for the purchase of limited partnership interests ("tender offers")
has increased in real estate limited partnerships generally. Many of these
tender offers have been made by investors seeking to make a profit from the
purchase of the interests. In the event a tender offer is made for interests in
the Registrant, the General Partner will issue a response to limited partners
expressing the General Partner's opinion regarding the offer. Certain
administrative costs will be incurred to respond to a tender offer. The General
Partner cannot predict with any certainty what impact a tender offer 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, 1996, the Registrant owns the four properties described
below, all of which are owned in fee simple:
Location Description of Property
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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.
San Antonio, Texas Walnut Hills Apartment Complex - Phase I: a
192-unit apartment complex located on approximately eight acres.
<PAGE>
San Antonio, Texas Walnut Hills Apartment Complex - Phase II: a
232-unit apartment complex located on approximately eight acres.
Each of the properties is held subject to various mortgage loans as described
in more detail in Note 6 of Notes to Financial Statements.
The average occupancy rates and the effective average rent per unit for each of
the last five years for the four properties owned by the Registrant at December
31, 1996, are described below:
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Cedar Creek I
Occupancy rate 95% 88% 97% 96% 95%
Effective rent $431 $478 $469 $436 $393
Cedar Creek II
Occupancy rate 95% 88% 94% 97% 95%
Effective rent $431 $478 $469 $436 $393
Walnut Hills I
Occupancy rate 94% 92% 92% 93% 96%
Effective rent $475 $484 $474 $449 $421
Walnut Hills II
Occupancy rate 94% 92% 92% 88% 96%
Effective rent $475 $484 $474 $449 $421
Apartment units in the above properties are rented with leases of one year or
less, with no tenant occupying greater than ten percent of the property. Real
estate taxes incurred in 1996 for the above properties totaled $429,882.
The Federal tax basis of the Registrant's properties totaled $8,169,719 as of
December 31, 1996. For Federal income tax purposes, the acquisition costs of
the properties are depreciated over useful lives ranging from 15 to 30 years,
using ACRS and pre-ACRS methods. Other minor assets are depreciated over their
applicable recovery periods.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding real property
investments.
<PAGE>
Item 3. Legal Proceedings
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Proposed class action
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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' alleged actions; recovery from the defendants of
all profits received by them as a result of their alleged 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. The Registrant believes it has 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.
Proposed class action
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On August 30, 1996, a proposed class action complaint was filed, Lenore Klein
vs. Lehman Brothers, Inc., et al., Superior Court of New Jersey, Law Division,
Union County, Docket No. Unn-L-5162-96). The Registrant, additional limited
partnerships which were sponsored by The Balcor Company (together with the
Partnership, the "Affiliated Partnerships"), American Express Company, Lehman
Brothers, Inc., additional limited partnerships sponsored by the predecessor of
Lehman Brothers, Inc. (together with the Registrant and the Affiliated
Partnerships, the "Defendant Partnerships") and Smith Barney Holdings, Inc. are
the named defendants in the action. The complaint was amended on October 18,
1996 to add additional plaintiffs. The amended complaint alleges, among other
things, common law fraud and deceit, negligent misrepresentation, breach of
contract, breach of fiduciary duty and violation of certain New Jersey statutes
relating to the disclosure of information in the offering of limited
partnership interests in the Defendant Partnerships. The amended complaint
seeks judgment for compensatory damages equal to the amount invested in the
Defendant Partnerships by the proposed class plus interest; general damages for
injuries arising from the defendants' alleged actions; equitable relief,
including rescission, on certain counts; punitive damages; treble damages on
certain counts; recovery from the defendants of all profits received by them as
a result of their alleged actions relating to the Defendant Partnerships;
attorneys' fees and other costs.
<PAGE>
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Registrant believes it has 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
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No matters were submitted to a vote of the Limited Partners of the Registrant
during 1996.
<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. 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, 1996, the number of record holders of Limited Partnership
Interests of the Registrant was 2,891.
Item 6. Selected Financial Data
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Year ended December 31,
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1996 1995 1994 1993 1992
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Total income $5,117,065 $6,043,472 $6,175,042 $5,290,545 $5,336,906
(Loss) income
before gain
on sale of
assets and
extraordinary
item (444,820) 135,417 414,158 (327,499) (567,448)
Net income (loss) 5,574,237 135,417 700,620 (327,499) 31,753
Net income (loss)
per Limited
Partnership
Interest 183.92 4.47 23.12 (10.81) 1.05
Total assets 10,225,202 12,335,453 15,387,316 15,170,384 14,278,492
Mortgage notes
payable 12,028,777 15,212,762 15,320,720 15,419,064 13,226,872
Distributions
per Limited (A)
Partnership
Interest 147.50 100.57 None None None
(A) These amounts include distributions of original capital of $140.00 and
$59.74 per Limited Partnership Interest for the years 1996 and 1995,
respectively.
<PAGE>
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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Balcor Equity Properties Ltd. - VIII ("the Partnership") sold the Greentree
Village Apartments in August 1996 and recognized a gain on sale of this
property. As a result of this gain, the Partnership generated higher net
income during the 1996 as compared to 1995. During 1994, the Partnership
received a repayment of its interest in the Sherwood Lake Apartments
wrap-around note receivable and recognized the previously deferred gain,
causing net income to decrease during 1995 as compared to 1994. Further
discussion of the Partnership's operations is summarized below.
1996 Compared to 1995
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In August 1996, the Partnership sold the Greentree Village Apartments. Also,
during the first three quarters of 1996, average occupancy levels decreased at
the Partnership's remaining properties due to a stagnant market in San Antonio
during 1996. The combined effect resulted in a decrease in rental and service
income during 1996 when compared to 1995. Occupancy levels have increased
during the fourth quarter of 1996 due to increased marketing efforts at the
properties. All of the remaining properties are located in the San Antonio,
Texas market. The properties are experiencing increased competition from new
construction of single and multifamily housing. The phase out of the corporate
suite rental program at Cedar Creek Apartments - Phases I and II also
contributed to the decrease in rental and service income.
Interest income on short-term investments decreased during 1996 when compared
to 1995 due to lower average cash balances resulting from a special
distribution made to the Limited Partners in October 1995 primarily from the
Sherwood Lakes note receivable repayment.
As a result of the Greentree Village Apartments sale, depreciation and property
management fees decreased during 1996 as compared to 1995.
As a result of increased expenditures of approximately $266,000 for payroll,
painting and decorating, and carpet replacement at Cedar Creek Apartments -
Phase I and II, property operating expense increased during 1996 when compared
to 1995. This increase was partially offset by a decrease of approximately
$223,000 resulting from the sale of Greentree Village Apartments.
Real estate tax expense decreased during 1996 when compared to 1995 primarily
due to the sale of Greentree Village Apartments as discussed above. Also
contributing to the decrease was a reduction in the assessed values of the
Partnership's remaining properties, all of which are located in the San
Antonio, Texas market.
<PAGE>
The Partnership incurred nonrecurring legal, consulting, printing and postage
costs in connection with two tender offers during 1995, and one tender offer
during 1996. As a result, administrative expenses decreased during 1996 as
compared to 1995.
The Partnership sold the Greentree Village Apartments in August 1996 and
recognized a gain on sale of $6,122,000.
As a result of the Greentree Village Apartments sale, the Partnership
recognized debt extinguishment expense of $102,943 related to the remaining
unamortized deferred expenses.
1995 Compared to 1994
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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 during 1995, interest
income on short-term investments increased during 1995 as compared to 1994.
Interest income on wrap-around note receivable was earned in 1994 on the
Sherwood Lakes wrap-around note receivable.
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.
The Partnership incurred nonrecurring 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.
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 the previously deferred gain on the sale of the
property.
Liquidity and Capital Resources
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The cash position of the Partnership increased by approximately $1,046,000 as
of December 31, 1996, when compared to December 31, 1995, primarily as a result
of the net proceeds received from the sale of Greentree Village Apartments in
August 1996. Cash flow of approximately $97,000 was provided by operating
activities consisting of cash flow from the operations of the Partnership's
properties and interest income on short-term investments, which were partially
offset by the payment of administrative expenses. Cash provided by investing
activities of approximately $8,559,000 consisted of proceeds from the sale of
Greentree Village Apartments, less selling costs. Cash used in financing
activities of approximately $7,610,000 consisted of a distribution to the
Limited Partners, the repayment of the mortgage note payable on Greentree
Village Apartments and principal payments on mortgage notes payable.
<PAGE>
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. The Greentree
Village Apartments was sold in August 1996 and generated positive cash flow
during each of 1996 and 1995. The Walnut Hills Apartments - Phase II generated
positive cash flow during each of 1996 and 1995. The Walnut Hills Apartments -
Phase I generated a marginal cash flow deficit during each of 1996 and 1995;
however, the combined property operations of Walnut Hills Apartments - Phases I
and II generated positive cash flow during each of 1996 and 1995. The Cedar
Creek Apartments - Phases I and II generated marginal cash flow deficits during
1996 as compared to positive cash flow during 1995. The decrease is due to
decreased average occupancy and rental rates at these apartment complexes. The
San Antonio market has experienced an increase in construction of new single
and multifamily housing that has increased competition for tenants. As of
December 31, 1996, the occupancy rates of the Partnership's remaining
properties ranged from 96% to 98%.
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, including improving operating
performance, and seeking rent increases where market conditions allow.
The Partnership's remaining properties are located in San Antonio, Texas. The
multi-housing market in San Antonio continues at a sluggish pace with occupancy
rates averaging 91% city wide. At December 31, 1996 occupancy at the
Partnership's remaining properties ranged from 96% to 98%. While San Antonio
continues to enjoy a relatively high job growth rate, this growth consists
largely of lower paying jobs in the service sector. As a result of the job
growth, approximately 6,000 new rental units have been added to the inventory
over the last three years and an additional 2,500 are anticipated in 1997. The
new construction in the San Antonio market could create an over supply
situation, which could have a negative impact on rental and occupancy rates.
In August 1996, the Partnership sold the Greentree Village Apartments in an all
cash sale for $8,800,000. From the proceeds of the sale, the Partnership paid
$3,073,129 to the third party mortgage holder in full satisfaction of the first
mortgage loan and paid $240,916 in selling costs. The Partnership distributed
the remaining proceeds to the Limited Partners in October 1996 after retaining
an appropriate amount of working capital as determined by the General Partner.
See Note 10 of Notes to Financial Statements for additional information.
The Partnership sold the Greentree Village Apartments in August 1996, and is
actively marketing the remaining properties in its portfolio. The timing of the
termination of the Partnership and final distribution of cash will depend upon
the nature and extent of liabilities and contingencies which exist or may
arise. Such contingencies may include legal and other fees stemming from
litigation involving the Partnership. In the absence of any contingency, the
reserves will be paid within twelve months of the last property being sold. In
the event a contingency exists, reserves may be held by the Partnership for a
longer period of time.
<PAGE>
Each of the Partnership's remaining 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 new lenders, the Partnership has no third-party financing which matures
prior to 2002.
The Partnership made distributions totaling $147.50 and $100.57 in 1996 and
1995, respectively. See Statement of Partner's Capital for additional
information. Distributions were comprised of $7.50 of Net Cash Receipts and
$140.00 of Net Cash Proceeds in 1996, and $40.83 of Net Cash Receipts and
$59.74 of Net Cash Proceeds in 1995. Distributions increased in 1996 as
compared to 1995 due to the sale of the Greentree Village Apartments. No
distributions were made in 1994. Regular quarterly distributions were suspended
in the first quarter of 1996 due to costs associated with the three unsolicited
tender offers to Limited Partners and the decrease in rental and service income
experienced at the San Antonio properties. To date, Limited Partners have
received cash distributions totaling $455.57 per $1,000 Interest. Of this
amount, $173.33 has been Net Cash Receipts and $282.24 represents Net Cash
Proceeds. Future distributions will depend on cash flow generated from the
Partnership's remaining properties and proceeds from future property sales, as
to all of which there can be no assurances. 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.
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
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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:
<PAGE>
December 31, 1996 December 31, 1995
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Financial Tax Financial Tax
Statements Returns Statements Returns
---------- ---------- ----------- --------
Total assets $10,225,202 $ 8,710,584 $12,335,453 $14,268,357
Partners' (deficit)
capital accounts:
General Partner (168,303) 41,567 (224,045) (181,585)
Limited Partners (2,274,026) (503,930) (3,366,783) (1,476,343)
Net income (loss):
General Partner 55,742 223,152 1,354 39,217
Limited Partners 5,518,495 5,398,151 134,063 (197,052)
Per Limited Part-
nership Interest 183.92 179.90 4.47 6.57
Item 9. Changes in and Disagreements with Accountants on Accounting and
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Financial Disclosure
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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 James E. Mendelson
Senior Vice President John K. Powell, Jr.
Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 49) 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 (age 42) 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.
James E. Mendelson (age 34) joined Balcor in July 1984 and is responsible for
Balcor's property sales activities. He also has supervisory responsibility for
Balcor's accounting, financial, treasury, investor services and investment
administration functions. From 1989 to 1995, Mr. Mendelson was Vice President -
Transaction Management and Vice President - Senior Transaction Manager and had
responsibility for various asset management matters relating to real estate
investments made by Balcor, including negotiations for the restructuring of
mortgage loan investments. Mr. Mendelson received his M.B.A. degree from the
University of Chicago.
<PAGE>
John K. Powell, Jr. (age 46) 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
function. 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.
Jayne A. Kosik (age 39) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Managing Director of The Balcor
Company. Ms. Kosik is a Certified Public Accountant.
(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 1996.
Item 11. Executive Compensation
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The Registrant paid $1,198 in 1996 with respect to one of the executive
officers and directors of BRI Partners-79, the General Partner. The Registrant
has not paid and does not propose to pay any remuneration to the remaining
executive officers and directors of the General Partner. Certain of the
remaining 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 9 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 entities are the Limited Partners which own 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 2,005.50 6.62%
Partnership Partners Limited
Interests Chicago, Partnership
Illinois Interests
Limited Metropolitan 1,515.00 5.00%
Partnership Acquisition VII Limited
Interests Greenville, Partnership
South Carolina Interests
<PAGE>
For purposes of this Item 12, WIG VII Partners is an affiliate of Metropolitan
Acquisition VII and, collectively, they own 11.62% of the 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
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(a & b) See Note 4 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 9 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
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(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.
(10) Agreement of Sale and attachment thereto relating to the sale of
Greentree Village Apartments, Colorado Springs, Colorado, previously filed as
Exhibit (10) to the Registrant's Current Report on Form 10-Q dated March 31,
1996, is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1996 is attached hereto.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter
ended December 31, 1996.
(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/ Jayne A. Kosik
-----------------------------------
Jayne A. Kosik
Managing Director and Chief
Financial Officer (Principal
Accounting Officer) of BRI
Partners-79, the General Partner
Date: March 26, 1997
--------------------
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 26, 1997
- -------------------- ---------------
Thomas E. Meador
Managing Director, and Chief
Financial Officer (Principal
Accounting Officer) of BRI
/s/ Jayne A. Kosik Partners-79, the General Partner March 26, 1997
- -------------------- ---------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE:
Report of Independent Accountants
Financial Statements
Balance Sheets, December 31, 1996 and 1995
Statements of Partners' Deficit, for the years ended December 31, 1996, 1995
and 1994
Statements of Income and Expenses, for the years ended December 31, 1996, 1995
and 1994
Statements of Cash Flows, for the years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1996
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>
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
--------------- ---------------
Cash and cash equivalents $ 1,588,218 $ 542,128
Escrow deposits - unrestricted 742,334 803,873
Escrow deposits - restricted 94,709
Accounts and accrued interest
receivable 194,163 839
Prepaid expenses 53,417 63,360
Deferred expenses, net of
accumulated amortization of
$180,390 in 1996 and $147,229
in 1995 293,887 449,353
--------------- ---------------
2,872,019 1,954,262
--------------- ---------------
Investment in real estate:
Land 929,151 1,325,898
Buildings and improvements 14,693,197 20,518,019
--------------- ---------------
15,622,348 21,843,917
Less accumulated depreciation 8,269,165 11,462,726
--------------- ---------------
Investment in real estate, net of
accumulated depreciation 7,353,183 10,381,191
--------------- ---------------
$ 10,225,202 $ 12,335,453
=============== ===============
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable $ 45,120 $ 45,964
Due to affiliates 53,729 19,344
Accrued liabilities, principally
real estate taxes 463,870 551,280
Security deposits 76,035 96,931
Mortgage notes payable 12,028,777 15,212,762
--------------- ---------------
Total liabilities 12,667,531 15,926,281
--------------- ---------------
<PAGE>
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1996 and 1995
(Continued)
Commitments and contingencies
Limited Partners' deficit (30,005
Interests issued and outstanding) (2,274,026) (3,366,783)
General Partner's deficit (168,303) (224,045)
--------------- ---------------
Total partner's deficit (2,442,329) (3,590,828)
--------------- ---------------
$ 10,225,202 $ 12,335,453
=============== ===============
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, 1996, 1995 and 1994
Partners' Deficit Accounts
---------------------------------------------
General Limited
Total Partner Partners
--------------- -------------- --------------
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)
Cash distributions (A) (4,425,738) (4,425,738)
Net income for the
year ended December
31, 1996 5,574,237 55,742 5,518,495
--------------- -------------- --------------
Balance at December 31,
1996 $ (2,442,329) $ (168,303) $ (2,274,026)
=============== ============== ==============
(A) Summary of cash distributions paid per Limited
Partnership Interest:
1996 1995 1994
-------------- ------------- -------------
First Quarter $7.50 None None
Second Quarter None None None
Third Quarter None None None
Fourth Quarter 140.00 $100.57 None
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, 1996, 1995 and 1994
1996 1995 1994
--------------- -------------- --------------
Income:
Rental and service $ 5,013,330 $ 5,861,649 $ 5,724,364
Interest on short-term
investments 103,735 181,823 43,253
Interest on wrap-around
note receivable 407,425
--------------- -------------- --------------
Total income 5,117,065 6,043,472 6,175,042
--------------- -------------- --------------
Expenses:
Interest on mortgage
notes payable 1,333,538 1,448,914 1,463,776
Interest on short-term
loans from affiliate 5,773
Depreciation 590,924 662,015 655,407
Amortization of
deferred expenses 52,523 53,836 53,836
Property operating 2,545,503 2,478,862 2,424,097
Real estate taxes 447,245 555,297 545,503
Property management
fees 249,068 279,931 286,031
Administrative 343,084 429,200 326,461
--------------- -------------- --------------
Total expenses 5,561,885 5,908,055 5,760,884
--------------- -------------- --------------
(Loss) income before gain
on sale of property and
extraordinary item (444,820) 135,417 414,158
Gain on sale of property 6,122,000 286,462
--------------- -------------- --------------
Income before
extraordinary item 5,677,180 135,417 700,620
Extraordinary item:
Debt extinguishment
expense (102,943)
--------------- -------------- --------------
Net income $ 5,574,237 $ 135,417 $ 700,620
=============== ============== ==============
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, 1996, 1995 and 1994
(Continued)
1996 1995 1994
--------------- -------------- --------------
Income before
extraordinary item
allocated to General
Partner $ 56,771 $ 1,354 $ 7,006
=============== ============== ==============
Income before
extraordinary item
allocated to Limited
Partners $ 5,620,409 $ 134,063 $ 693,614
=============== ============== ==============
Income before
extraordinary item per
Limited Partnership
Interest (30,005 issued
and outstanding) $ 187.32 $ 4.47 $ 23.12
=============== ============== ==============
Extraordinary item
allocated to General
Partner $ (1,029) None None
=============== ============== ==============
Extraordinary item
allocated to Limited
Partners $ (101,914) None None
=============== ============== ==============
Extraordinary item per
Limited Partnership
Interest (30,005 issued
and outstanding) $ (3.40) None None
=============== ============== ==============
Net income allocated to
General Partner $ 55,742 $ 1,354 $ 7,006
=============== ============== ==============
Net income allocated to
Limited Partners $ 5,518,495 $ 134,063 $ 693,614
=============== ============== ==============
Net income per Limited
Partnership Interest
(30,005 issued and
outstanding) $ 183.92 $ 4.47 $ 23.12
=============== ============== ==============
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, 1996, 1995 and 1994
1996 1995 1994
--------------- -------------- --------------
Operating activities:
Net income $ 5,574,237 $ 135,417 $ 700,620
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Gain on sale of
property (6,122,000) (286,462)
Debt extinguishment
expense 102,943
Depreciation of
properties 590,924 662,015 655,407
Amortization of
deferred expenses 52,523 53,836 53,836
Net change in:
Escrow deposits -
unrestricted 61,539 (79,858) (138,271)
Escrow deposits -
restricted 94,709 (42,817) (12,672)
Accounts and
accrued interest
receivable (193,324) 32,872 (33,711)
Prepaid expenses 9,943 (63,360)
Accounts payable (844) (31,213) 22,474
Due to affiliates 34,385 (30,003) 11,936
Accrued liabilities (87,410) 3,158 13,580
Security deposits (20,896) (3,661) (15,559)
--------------- -------------- --------------
Net cash provided by
operating activities 96,729 636,386 971,178
--------------- -------------- --------------
Investing activities:
Proceeds from sale of
property 8,800,000
Payment of selling
costs (240,916)
Additions to properties (60,134)
Proceeds from wrap-
around note 1,792,575
receivable
--------------- --------------
Net cash provided by
investing activities 8,559,084 1,732,441
--------------- --------------
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, 1996, 1995 and 1994
(Continued)
1996 1995 1994
--------------- -------------- --------------
Financing activities:
Repayment of mortgage
notes payable $ (3,073,129) $ (417,775)
Principal payments on
mortgage notes
payable (110,856) $ (107,958) (98,344)
Releases of repair
escrows 99,903
Releases of escrow
deposits - restricted 42,460 109,822
Distributions to
Limited Partners (4,425,738) (3,017,603)
--------------- -------------- --------------
Net cash used in
financing activities (7,609,723) (3,083,101) (306,394)
--------------- -------------- --------------
Net change in cash and
cash equivalents 1,046,090 (2,446,715) 2,397,225
Cash and cash equivalents
at beginning of period 542,128 2,988,843 591,618
--------------- -------------- --------------
Cash and cash equivalents
at end of period $ 1,588,218 $ 542,128 $ 2,988,843
=============== ============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Equity Properties Ltd.-VIII:
We have audited the financial statements and 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, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, 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.
As described in Note 2 to the financial statements, the Partnership Agreement
provides for the dissolution of the Partnership upon the disposition of all
its real estate interests. The Partnership is presently marketing for sale its
remaining real estate assets. Upon disposition of its remaining real estate
assets and resolution of the litigation described in Note 13 to the financial
statements, the Partnership intends to cease operations and dissolve.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 20, 1997
<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 (the "Partnership") is engaged principally
in the operation of residential real estate located in San Antonio, Texas.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold the Greentree Village Apartments in 1996, and
is actively marketing the remaining properties in its portfolio. The timing of
the termination of the Partnership and final distribution of cash will depend
upon the nature and extent of liabilities and contingencies which exist or may
arise. Such contingencies may include legal and other fees stemming from
litigation involving the Partnership including, but not limited to, the
lawsuits discussed in Note 13 of Notes to the Financial Statements. In the
absence of any contingency, the reserves will be paid within twelve months of
the last property being sold. In the event a contingency exists, reserves may
be held by the Partnership for a longer period of time.
3. 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.
<PAGE>
(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 based on the current sales price
less estimated closing costs. 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. Upon sale, any remaining balance is
recognized as debt extinguishment expense and classified as an extraordinary
item.
(e) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles.
(f) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
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.
(g) Cash and cash equivalents include all unrestricted, highly liquid
investments with an original maturity of three months or less. Cash is held or
invested in one financial institution.
(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.
4. 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.
<PAGE>
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.
5. 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
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.
<PAGE>
6. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1996 and 1995 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 12/31/96 12/31/95 Rate Date Payment Payment
- ----------- ----------- ---------- ------- ------- -------- -------
Apartment Complexes:
Cedar Creek
Phase I $ 2,314,047 $ 2,333,156 9.38% 2003 $19,763 $2,138,000
Cedar Creek
Phase II 2,752,497 2,775,228 9.38% 2003 23,507 2,543,000
Greentree Village (A) 3,083,359
Walnut Hills
Phase I 5,082,431 5,125,345 9.26% 2002 42,977 4,767,000
Walnut Hills
Phase II 1,879,802 1,895,674 9.26% 2002 15,896 1,763,000
----------- -----------
Total $12,028,777 $15,212,762
=========== ===========
(A) In August 1996, the Greentree Village Apartments was sold. See Note 10 of
Notes to Financial Statements for additional information.
All of the Partnership's loans described above require current monthly payments
of principal and interest.
Real estate with an aggregate carrying value of $7,353,183 at December 31, 1996
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:
1997 $ 112,000
1998 120,000
1999 133,000
2000 146,000
2001 160,000
During the years ended December 31, 1996, 1995 and 1994, the Partnership
incurred and paid interest expense on mortgage notes payable of $1,333,538,
$1,448,914 and $1,463,776, respectively.
<PAGE>
7. Management Agreements:
As of December 31, 1996, 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.
8. 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 1996 in the financial statements is $223,066 less than the
tax income of the Partnership for the same period.
9. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------- ------ ------- ------ ------- -------
Property management fees None None None None $283,313 None
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $11,945 $10,349 $34,886 $3,244 50,895 $18,653
Data processing 2,421 None 21,180 2,454 23,660 4,773
Investor communica-
tions None None 5,217 None 17,584 4,864
Legal 8,250 7,148 15,472 2,769 6,703 3,202
Portfolio management 38,528 33,380 63,955 10,531 27,997 15,353
Other 10,136 2,852 1,994 346 18,156 2,502
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 program expenses. The Partnership paid premiums to the deductible insurance
program of $7,231, $35,119 and $49,714 for 1996, 1995 and 1994, respectively.
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed the
Partnership's properties until the affiliate was sold to a third party in
November 1994.
<PAGE>
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
paid interest expense of $7,801 in 1994 on these loans.
10. Property Sale:
In August 1996, the Partnership sold the Greentree Village Apartments in an all
cash sale for $8,800,000. From the proceeds of the sale, the Partnership paid
$3,073,129 to the third party mortgage holder in full satisfaction of the first
mortgage loan and paid $240,916 in selling costs. The basis of the property
was $2,437,084, which is net of accumulated depreciation of $3,784,485. For
financial statement purposes, the Partnership recognized a gain of $6,122,000
from the sale of this property.
11. Extraordinary Item:
In August 1996, the Partnership sold the Greentree Village Apartments. In
connection with the sale, the Partnership wrote off the remaining unamortized
deferred expenses in the amount of $102,943. This amount was recognized as an
extraordinary item and was classified as debt extinguishment expense.
12. Fair Values of Financial Instruments:
The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1996 and 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 1996 and
1995 for mortgage loans with similar terms and maturities, the fair value of
the mortgage notes payable approximates the carrying value.
13. Contingency:
The Partnership is currently involved in two lawsuits whereby the Partnership
and certain affiliates have been named as defendants alleging substantially
similar claims involving certain federal securities law violations with regard
to the adequacy and accuracy of disclosures of information concerning, as well
as marketing efforts related to, the offering of the Limited Partnership
Interests of the Partnership. The defendants continue to vigorously contest
these actions. A plaintiff class has not been certified in either action and,
no determinations of the merits have been made. It is not determinable at this
time whether or not an unfavorable decision in either action would have a
material adverse impact on the financial position, operations or liquidity of
the Partnership. The Partnership believes that it has meritorious defenses to
contest the claims.
<PAGE>
PART II
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1996
<CAPTION>
Col. A Col. B Col. C Col. D
- --------------------- -------- -------------------- ---------------------------------
Initial Cost Cost Adjustments
to Partnership Subsequent to Acquisition
-------------------- ---------------------------------
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 (c) $ 196,020 $ 4,591,190 $ 94,448 $ 6,801 ($1,299,826)
Cedar Creek Apts./II,
216-units in San
Antonio, TX (c) 300,000 6,189,358 59,907 9,336 (1,680,893)
Walnut Hills Apts./I,
192-units in San
Antonio, TX (c) 247,228 3,314,879 82,225 15,728 (347,203)
Walnut Hills Apts./II,
232-units in San
Antonio, TX (c) 372,576 3,764,901 92,722 15,748 (402,797)
---------- ----------- -------- ------- -----------
Total $1,115,824 $17,860,328 $329,302 $47,613 ($3,730,719)
========== =========== ======== ======= ============
See Notes (a) through (g) following.
</TABLE>
<PAGE>
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1996
(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 (d)(e) tion(e) 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 $2,236,592 1978 4/07/81 (f)
Cedar Creek Apts./II,
216-units in San
Antonio, TX 222,714 4,654,994 4,877,708 2,974,854 1979 4/07/81 (f)
Walnut Hills Apts./I,
192-units in San
Antonio, TX 224,767 3,088,090 3,312,857 1,523,679 1979 11/04/86 (g)(f)
Walnut Hills Apts./II,
232-units in San
Antonio, TX 338,520 3,504,630 3,843,150 1,534,040 1980 11/04/86 (g)(f)
---------- ----------- ----------- -----------
Total $929,151 $14,693,197 $15,622,348 $8,269,165
========== =========== =========== ===========
</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) See description of mortgage notes payable in Note 6 of Notes to Financial
Statements.
(d) The aggregate cost of land for Federal income tax purposes is $1,230,860
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $6,938,859. The total of these is $8,169,719.
(e)Reconciliation of Real Estate
-----------------------------
1996 1995 1994
---------- ---------- ----------
Balance at beginning of year $21,843,917 $21,843,917 $21,783,783
Additions during year:
Improvements None None 60,134
Reductions during year:
Cost of property sold (6,221,569) None None
----------- ----------- -----------
Balance at end of year $15,622,348 $21,843,917 $21,843,917
=========== =========== ==========
Reconciliation of Accumulated Depreciation
-------------------------------------------
1996 1995 1994
---------- ---------- ----------
Balance at beginning of year $11,462,726 $10,800,711 $10,145,304
Depreciation expense for the
year 590,924 662,015 655,407
Accumulated depreciation of
property sold (3,784,485) None None
----------- ----------- -----------
Balance at end of year $8,269,165 $11,462,726 $10,800,711
=========== =========== ===========
<PAGE>
(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) 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-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1588
<SECURITIES> 0
<RECEIVABLES> 194
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2578
<PP&E> 15622
<DEPRECIATION> 8269
<TOTAL-ASSETS> 10225
<CURRENT-LIABILITIES> 639
<BONDS> 12029
0
0
<COMMON> 0
<OTHER-SE> (2442)
<TOTAL-LIABILITY-AND-EQUITY> 10225
<SALES> 0
<TOTAL-REVENUES> 11239
<CGS> 0
<TOTAL-COSTS> 3242
<OTHER-EXPENSES> 986
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1334
<INCOME-PRETAX> 5677
<INCOME-TAX> 0
<INCOME-CONTINUING> 5677
<DISCONTINUED> 0
<EXTRAORDINARY> (103)
<CHANGES> 0
<NET-INCOME> 5574
<EPS-PRIMARY> 183.92
<EPS-DILUTED> 183.92
</TABLE>
