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, 1998
-----------------
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
------------- -------------
Commission file number 0-9541
-------
BALCOR EQUITY PROPERTIES LTD.-VIII
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3011615
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Rd.
Bannockburn, IL 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(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
- ----------------
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 has
retained cash reserves from the sale of its real estate investments for
contingencies which exist or may arise. The Registrant's operations currently
consist of interest income earned on short-term investments and the payment of
administrative expenses.
The Registrant utilized the net offering proceeds to acquire thirteen real
property investments and has since disposed of all of these 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 Partnership Agreement provides for the dissolution of the Registrant upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Registrant sold its final real estate investment in July 1997.
The Registrant has retained a portion of the cash from the property sales to
satisfy obligations of the Registrant as well as establish a reserve for
contingencies. 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 and costs stemming from litigation involving the Registrant
including, but not limited to, the lawsuit discussed in "Item 3. Legal
Proceedings". Due to this litigation, the Registrant will not be dissolved and
reserves will be held by the Registrant until the conclusion of all
contingencies. There can be no assurances as to the time frame for conclusion
of these contingencies.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" for information regarding the
Registrant's Year 2000 readiness.
The Registrant no longer has an ownership interest in any real estate
investment. The General Partner is not aware of any material potential
liability relating to environmental issues or conditions affecting real estate
formerly owned by 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
- ------------------
As of December 31, 1998, the Registrant did not own any properties.
<PAGE>
In the opinion of the General Partner, the Registrant has obtained adequate
insurance coverage for property liability and property damage matters.
See Notes to Financial Statements for other information regarding former real
property investments.
Item 3. Legal Proceedings
- -------------------------
Masri vs. Lehman Brothers, Inc., et al.
- ---------------------------------------
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, 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.
Plaintiffs' counsel has indicated an intent to withdraw this complaint. 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 how the outcome of
this action will impact the remaining cash reserves of 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 1998.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- -------------------------------------------------------------------------
Matters
- -------
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 "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources".
As of December 31, 1998, the number of record holders of Limited Partnership
Interests of the Registrant was 2,807.
Item 6. Selected Financial Data
- -------------------------------
Year ended December 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- --------- ---------- ---------- ----------
Total income $49,015 $2,054,040 $5,117,065 $6,043,472 $6,175,042
(Loss) income
before gain
on sales of
assets and
extraordinary
item (119,947) (717,805) (444,820) 135,417 414,158
Net (loss) income (119,947) 8,409,487 5,574,237 135,417 700,620
Net (loss) income
per Limited
Partnership
Interest- Basic
and Diluted (4.00) 275.35 183.92 4.47 23.12
Total assets 886,720 1,028,006 10,225,202 12,335,453 15,387,316
Mortgage notes
payable None None 12,028,777 15,212,762 15,320,720
Distributions
per Limited
Partnership
Interest (A) None 167.00 147.50 100.57 None
(A) These amounts include distributions of original capital of $167.00, $140.00
and $59.74 per Limited Partnership Interest for the years 1997, 1996 and 1995,
respectively.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
- ---------------------
Operations
- ----------
Summary of Operations
- ---------------------
Balcor Equity Properties Ltd. - VIII ("the Partnership") sold one property
during 1996 and its four remaining properties during 1997 and recognized gains
in connection with the property sales. During 1998, administrative expenses and
property operating expenses related to sold properties were higher than
interest income earned on short-term investments, which resulted in a net loss
during 1998 as compared to net income during 1997. The gains recognized during
1997 exceeded the gain recognized during 1996. This was the primary reason net
income increased during 1997 as compared to 1996. Further discussion the
Partnership's operations is summarized below.
1998 Compared to 1997
- ---------------------
In 1997, the Partnership sold its four remaining properties; the Cedar Creek
Phases I and II apartment complexes and the Walnut Hills Phases I and II
apartment complexes and recognized aggregate gains on sales of $9,635,582. As a
result, rental and service income, interest expense on mortgage notes payable,
depreciation expense, amortization expense, real estate tax expense and
property management fees expense ceased during 1997.
Higher average cash balances were available for investment during 1997 due to
proceeds retained from the sale of the Greentree Village Apartments in 1996 for
working capital requirements and to proceeds received in connection with the
1997 sales of the Cedar Creek Phases I and II and Walnut Hills Phases I and II
apartment complexes prior to distribution to Limited Partners in August 1997.
As a result, interest income on short-term investments decreased during 1998
when compared to 1997.
The Partnership recognized other income during 1997 primarily in connection
with partial refunds of prior years' insurance premiums relating to the
Partnership's properties.
Property operating expenses decreased during 1998 as compared to 1997 due to
the sale of the Partnership's four remaining properties in 1997. During 1998,
the Partnership paid additional expenditures related to three of the properties
sold in 1997.
Primarily as a result of lower accounting, data processing, portfolio
management and bank fees, administrative expenses decreased during 1998 as
compared to 1997.
<PAGE>
In 1997, the Partnership wrote-off the remaining unamortized deferred financing
fees totaling $268,717, and paid prepayment penalties totaling $239,573 in
connection with the sales of the Cedar Creek - Phases I and II and the Walnut
Hills - Phases I and II apartment complexes. These amounts were recognized as
extraordinary items and classified as debt extinguishment expense for financial
statement purposes.
1997 Compared to 1996
- ---------------------
In 1996, the Partnership sold the Greentree Village Apartments and recognized a
gain on sale of $6,122,000. In 1997, the Partnership sold its four remaining
properties, as described above. As a result, rental and service income,
interest expense on mortgage notes payable, depreciation, amortization of
deferred expenses, property operating expenses, real estate taxes and property
management fees decreased during 1997 as compared to 1996.
Interest income on short-term investments increased during 1997 when compared
to 1996 due to higher average cash balances resulting from the investment of
proceeds received from the sale of the Cedar Creek - Phases I and II Apartments
in June 1997 and Walnut Hills - Phases I and II Apartments in July 1997 prior
to distribution to Limited Partners in August 1997.
Administrative expenses decreased in 1997 as compared to 1996 primarily due to
a decrease in accounting, legal and portfolio management fees.
In 1996, the Partnership wrote-off the remaining unamortized deferred financing
fees in connection with the sale of the Greentree Village Apartments in the
amount of $102,943. This amount was recognized as an extraordinary item and
classified as debt extinguishment expense for financial statement purposes.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $120,000 as of
December 31, 1998 as compared to December 31, 1997 due to cash used in
operating activities for the payment of administrative expenses and property
operating expenses related to sold properties, which were partially offset by
interest income earned on short-term investments.
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 its final real estate investment in July
1997. The Partnership has retained a portion of the cash to satisfy obligations
of the Partnership as well as establish a reserve for contingencies. 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 and costs
stemming from litigation involving the Partnership including, but not limited
to, the lawsuit discussed in "Item 3. Legal Proceedings". Due to this
litigation, the Partnership will not be dissolved and reserves will be held by
the Partnership until the conclusion of all contingencies. There can be no
assurances as to the time frame for conclusion of these contingencies.
<PAGE>
The Partnership made distributions in 1997 and 1996 totaling $167.00 and
$147.50 per Limited Partnership Interest, respectively. See Statement of
Partners' Capital (Deficit) for additional information. Distributions were
comprised of $167.00 of Net Cash Proceeds in 1997 and $7.50 of Net Cash
Receipts and $140.00 of Net Cash Proceeds in 1996.
Limited Partners have received distributions totaling $622.57 per $1,000
Interest, as well as certain tax benefits. Of this amount, $173.33 represents
Cash Flow from operations and $449.24 represents Net Cash Proceeds. No
distributions are anticipated to be made prior to the termination of the
Partnership. However, after paying final partnership expenses, any remaining
cash reserves will be distributed. Limited Partners will not recover all of
their original investment.
The Partnership sold all of its remaining real property investments and
distributed a majority of the proceeds from these sales to Limited Partners in
1996 and 1997. Since the Partnership no longer has any operating assets, the
number of computer systems and programs necessary to operate the Partnership
has been significantly reduced. The Partnership relies on third party vendors
to perform most of its functions and has implemented a plan to determine the
Year 2000 compliance status of these key vendors. The Partnership is within its
timeline for having these plans completed prior to the year 2000.
The Partnership's plan to determine the Year 2000 compliance status of its key
vendors involves the solicitation of information from these vendors through the
use of surveys, follow-up discussions and review of data where needed. The
Partnership has sent out surveys to these vendors and received back a majority
of these surveys. While the Partnership cannot guarantee Year 2000 compliance
by its key vendors, and in many cases will be relying on statements from these
vendors without independent verification, preliminary surveys indicate that the
key vendors performing services for the Partnership are aware of the issues and
are working on a solution to achieve compliance before the year 2000. The
Partnership is in the process of developing a contingency plan in the event any
of its key vendors are not Year 2000 compliant prior to the year 2000. As part
of its contingency plan, the Partnership will identify replacement vendors in
the event that current vendors are not substantially Year 2000 compliant by
June 30, 1999. The Partnership does not believe that failure by any of its key
vendors to be Year 2000 compliant by the year 2000 would have a material effect
on the business, financial position or results of operations of the
Partnership.
Certain statements in this report constitute "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements may include statements regarding income or losses as well as
assumptions relating to the foregoing.
The forward-looking statements made by the Partnership are subject to known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to differ from any
future results, performance or achievements expressed or implied by the
forward-looking statements.
<PAGE>
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
The supplemental financial information specified by Item 305 of Regulation S-K
is not applicable.
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, 1998 December 31, 1997
----------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
---------- ---------- ----------- --------
Total assets $886,720 $4,484,666 $1,028,006 $4,605,645
Partners' (deficit)
capital accounts:
General Partner (20,636) (13,264) (20,636) (20,636)
Limited Partners 857,012 4,447,581 976,959 4,569,990
Net (loss) income:
General Partner None 7,372 147,667 113,797
Limited Partners (119,947) (122,409) 8,261,820 9,908,755
Per Limited Part-
nership Interest (4.00)(A) (4.08) 275.35(A) 330.24
(A) Amount represents basic and diluted net (loss) income per Limited
Partnership Interest.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
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
- -----------------------------------------------------------
(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 Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 51) 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 member of the board of directors of
The Balcor Company. He is also a 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.
Mr. Meador is on the Board of Directors of Grubb & Ellis Company, a publicly
traded commercial real estate firm. Mr. Meador was elected to the Board of
Grubb & Ellis Company in May 1998. Mr. Meador is also a director of AMLI
Commercial Properties Trust, a private real estate investment trust that owns
office and industrial buildings in the Chicago, Illinois area. Mr. Meador was
elected to the Board of AMLI Commercial Properties Trust in August 1998.
Alexander J. Darragh (age 44) joined Balcor in September 1988 and is
responsible for real estate advisory services for Balcor and American Express
Company. Mr. Darragh received masters' degrees in Urban Geography from Queen's
University and in Urban Planning from Northwestern University.
Jayne A. Kosik (age 41) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. Ms. Kosik is also a member of the board of directors of The Balcor
Company. 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 Senior Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.
<PAGE>
(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 1998.
Item 11. Executive Compensation
- -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of the General Partner. The executive 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
- -----------------------------------------------------------------------
(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 6.69%
Partnership Partners Limited
Interests Chicago, Partnership
Illinois Interests
Limited Metropolitan 1,515.00 5.05%
Partnership Acquisition VII Limited
Interests Greenville, Partnership
South Carolina Interests
For purposes of this Item 12, WIG VIII Partners is an affiliate of Metropolitan
Acquisition VII and, collectively, they own 11.74% of the Interests.
(b) Neither BRI Partners-79 nor its officers or partners own any Limited
Partnership Interests of the Registrant.
Relatives of the officers and affiliates of the partners 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.
<PAGE>
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
(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 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>
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
- -------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements 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) Material Contracts:
(a)(i) Agreement of Sale and attachment thereto related to the sale of the
Walnut Hills - Phase I Apartments, San Antonio, Texas, previously filed as
Exhibit (2)(a) to the Registrant's Current Report on Form 8-K dated March 31,
1997 is incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of Walnut Hills
- - Phase I Apartments, San Antonio, Texas, previously filed as Exhibit
(10)(a)(ii) to the Registrant's Quarterly Report on Form 10-Q dated June 30,
1997 is incorporated herein by reference.
(b)(i) Agreement of Sale and attachment thereto related to the sale of the
Walnut Hills - Phase II Apartments, San Antonio, Texas, previously filed as
Exhibit (2)(b) to the Registrant's Current Report on Form 8-K dated March 31,
1997 is incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of Walnut Hills
- - Phase II Apartments, San Antonio, Texas, previously filed as Exhibit
(10)(b)(ii) to the Registrant's Quarterly Report on Form 10-Q dated June 30,
1997 is incorporated herein by reference.
(c)(i) Agreement of Sale and attachment thereto related to the sale of Cedar
Creek - Phases I and II Apartments, San Antonio, Texas, previously filed as
Exhibit (10)(d)(i) to the Registrant's Quarterly Report on Form 10-Q dated
March 31, 1997, is incorporated herein by reference.
(ii) Escrow Agreement related to the Sale of Cedar Creek - Phases I and II
Apartments, San Antonio, Texas, previously filed as Exhibit (10)(a)(ii) to the
Registrant's Quarterly Report on Form 10-Q dated March 31, 1997, is
incorporated herein by reference.
<PAGE>
(iii) First Amendment to Agreement of Sale related to the sale of Cedar Creek -
Phases I and II Apartments, San Antonio, Texas, previously filed as Exhibit
(10)(d)(iii) to the Registrant's Quarterly Report on Form 10-Q dated March 31,
1997, is incorporated herein by reference.
(iv) Second Amendment to Agreement of Sale related to the sale of Cedar Creek -
Phases I and II Apartments, San Antonio, Texas, previously filed as Exhibit
(10)(d)(iv) to the Registrant's Quarterly Report on Form 10-Q dated March 31,
1997, is incorporated herein by reference.
(v) Third Amendment to Agreement of Sale relating to the sale of Cedar Creek -
Phases I and II Apartments, San Antonio, Texas, previously filed as Exhibit
(10)(d)(v) to the Registrant's Quarterly Report on Form 10-Q dated June 30,
1997 is incorporated herein by reference.
(vi) Fourth Amendment to Agreement of Sale and Escrow Agreement relating to the
sale of Cedar Creek - Phases I and II Apartments, San Antonio, Texas,
previously filed as Exhibit (10)(d)(vi) to the Registrant's Quarterly Report on
Form 10-Q dated June 30, 1997 is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1998 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended on December 31, 1998.
(c) Exhibits: See Item 14(a)(3) above.
<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
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial Officer) of
BRI Partners-79, the General Partner
Date: March 19, 1999
--------------------
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,
the General Partner
/s/ Thomas E. Meador March 19, 1999
- -------------------- --------------
Thomas E. Meador
Senior Managing Director, and Chief
Financial Officer (Principal
Accounting and Financial Officer) of
BRI Partners-79, the General Partner
/s/ Jayne A. Kosik March 19, 1999
- -------------------- --------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1998 and 1997
Statements of Partners' Capital (Deficit), for the years ended December 31,
1998, 1997 and 1996
Statements of Income and Expenses, for the years ended December 31, 1998, 1997
and 1996
Statements of Cash Flows, for the years ended December 31, 1998, 1997 and 1996
Notes to Financial Statements
Financial Statement Schedules 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:
In our opinion, the accompanying balance sheets and the related statements of
partners' capital (deficit), of income and expenses and of cash flows present
fairly, in all material respects, the financial position of Balcor Equity
Properties Ltd.-VIII An Illinois Limited Partnership (the "Partnership") at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
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. As of December 31, 1998, the Partnership no longer has
an ownership interest in any real estate investment. Upon resolution of the
litigation described in Note 11 to the financial statements, the Partnership
intends to cease operations and dissolve.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 17, 1999
<PAGE>
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
--------------- ---------------
Cash and cash equivalents $ 882,940 $ 1,002,912
Accounts and accrued interest receivable 3,780 25,094
--------------- ---------------
$ 886,720 $ 1,028,006
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 28,259 $ 20,257
Due to affiliates 22,085 51,426
--------------- ---------------
Total liabilities 50,344 71,683
--------------- ---------------
Commitments and contingencies
Limited Partners' capital
(30,005 Interests issued and outstanding) 857,012 976,959
General Partner's deficit (20,636) (20,636)
--------------- ---------------
Total partner's capital 836,376 956,323
--------------- ---------------
$ 886,720 $ 1,028,006
=============== ===============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL(DEFICIT)
for the years ended December 31, 1998, 1997 and 1996
Partners' Capital(Deficit) Accounts
---------------------------------------------
General Limited
Total Partner Partners
--------------- -------------- --------------
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)
Cash distributions (A) (5,010,835) (5,010,835)
Net income for the year
ended December 31, 1997 8,409,487 147,667 8,261,820
--------------- -------------- --------------
Balance at December 31, 1997 956,323 (20,636) 976,959
Net loss for the year
ended December 31, 1998 (119,947) (119,947)
--------------- -------------- --------------
Balance at December 31, 1998 $ 836,376 $ (20,636) $ 857,012
=============== ============== ==============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1998 1997 1996
-------------- ------------- -------------
First Quarter None None $7.50
Second Quarter None None None
Third Quarter None $167.00 None
Fourth Quarter None None 140.00
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, 1998, 1997 and 1996
1998 1997 1996
--------------- -------------- --------------
Income:
Rental and service $ 1,904,016 $ 5,013,330
Interest on short-term
investments $ 49,015 133,199 103,735
Other 16,825
--------------- -------------- --------------
Total income 49,015 2,054,040 5,117,065
--------------- -------------- --------------
Expenses:
Interest on mortgage
notes payable 555,453 1,333,538
Depreciation 231,604 590,924
Amortization of
deferred expenses 25,170 52,523
Property operating 29,219 1,339,012 2,545,503
Real estate taxes 234,376 447,245
Property management
fees 95,944 249,068
Administrative 139,743 290,286 343,084
--------------- -------------- --------------
Total expenses 168,962 2,771,845 5,561,885
--------------- -------------- --------------
Loss before gain on
sales of properties and
extraordinary item (119,947) (717,805) (444,820)
Gain on sales of properties 9,635,582 6,122,000
--------------- -------------- --------------
(Loss) income before
extraordinary item (119,947) 8,917,777 5,677,180
Extraordinary item:
Debt extinguishment
expense (508,290) (102,943)
--------------- -------------- --------------
Net (loss) income $ (119,947) $ 8,409,487 $ 5,574,237
=============== ============== ==============
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, 1998, 1997 and 1996
(Continued)
1998 1997 1996
--------------- -------------- --------------
Income before
extraordinary item
allocated to General
Partner None $ 156,594 $ 56,771
=============== ============== ==============
(Loss) income before
extraordinary item
allocated to Limited
Partners $ (119,947) $ 8,761,183 $ 5,620,409
=============== ============== ==============
(Loss) income before
extraordinary item per
Limited Partnership
Interest (30,005 issued
and outstanding) - Basic
and Diluted $ (4.00) $ 291.99 $ 187.32
=============== ============== ==============
Extraordinary item
allocated to General
Partner None $ (8,927) $ (1,029)
=============== ============== ==============
Extraordinary item
allocated to Limited
Partners None $ (499,363) $ (101,914)
=============== ============== ==============
Extraordinary item per
Limited Partnership
Interest (30,005 issued
and outstanding) - Basic
and Diluted None $ (16.64) $ (3.40)
=============== ============== ==============
Net income allocated to
General Partner None $ 147,667 $ 55,742
=============== ============== ==============
Net (loss) income allocated
to Limited Partners $ (119,947) $ 8,261,820 $ 5,518,495
=============== ============== ==============
Net (loss) income per Limited
Partnership Interest
(30,005 issued and
outstanding) - Basic
and Diluted $ (4.00) $ 275.35 $ 183.92
=============== ============== ==============
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, 1998, 1997 and 1996
1998 1997 1996
--------------- -------------- --------------
Operating activities:
Net (loss) income $ (119,947) $ 8,409,487 $ 5,574,237
Adjustments to reconcile
net (loss) income
to net cash (used in) or
provided by operating
activities:
Gain on sales of
properties (9,635,582) (6,122,000)
Debt extinguishment
expense 268,717 102,943
Depreciation of
properties 231,604 590,924
Amortization of
deferred expenses 25,170 52,523
Net change in:
Escrow deposits -
unrestricted 742,334 61,539
Escrow deposits -
restricted 94,709
Accounts and
accrued interest
receivable 21,314 169,069 (193,324)
Prepaid expenses 53,417 9,943
Accounts payable 8,002 (24,863) (844)
Due to affiliates (29,341) (2,303) 34,385
Accrued liabilities (463,870) (87,410)
Security deposits (76,035) (20,896)
--------------- -------------- --------------
Net cash (used in) or
provided by operating
activities (119,972) (302,855) 96,729
--------------- -------------- --------------
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, 1998, 1997 and 1996
(Continued)
1998 1997 1996
--------------- -------------- --------------
Investing activities:
Proceeds from sales of
properties 17,200,000 8,800,000
Payment of selling costs (442,839) (240,916)
Funding of escrow in con-
nection with the sale
of real estate (100,000)
Release of escrow in con-
nection with the sale
of real estate 100,000
-------------- -------------
Net cash provided by
investing activities 16,757,161 8,559,084
-------------- --------------
Financing activities:
Distributions to
Limited Partners $ (5,010,835) $ (4,425,738)
Repayment of mortgage
notes payable (11,978,663) (3,073,129)
Principal payments on
mortgage notes payable (50,114) (110,856)
-------------- --------------
Net cash used in
financing activities (17,039,612) (7,609,723)
--------------- -------------- --------------
Net change in cash and
cash equivalents $ (119,972) (585,306) 1,046,090
Cash and cash equivalents
at beginning of year 1,002,912 1,588,218 542,128
--------------- -------------- --------------
Cash and cash equivalents
at end of year $ 882,940 $ 1,002,912 $ 1,588,218
=============== ============== ==============
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 (the "Partnership") has retained cash
reserves from the sale of its real estate investments for contingencies which
exist or may arise. The Partnership's operations currently consist of interest
income earned on short-term investments and the payment of administrative
expenses.
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 its final real estate investment in July
1997. The Partnership has retained a portion of the cash to satisfy obligations
of the Partnership as well as to establish a reserve for contingencies. 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 and
costs stemming from litigation involving the Partnership including, but not
limited to, the lawsuit discussed in Note 11 of Notes to Financial Statements.
Due to this litigation, the Partnership will not be dissolved and reserves will
be held by the Partnership until the conclusion of all contingencies. There can
be no assurances as to the time frame for conclusion of these contingencies.
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 was computed using the straight-line and accelerated
methods. Rates used in the determination of depreciation were based upon the
following estimated useful lives:
Buildings and improvements 15 to 33 years
Furniture and fixtures 3 to 5 years
Maintenance and repairs were charged to expense when incurred. Expenditures for
improvements were charged to the related asset account.
When properties were sold, the related costs and accumulated depreciation were
removed from the respective accounts. Any gain or loss on disposition was
recognized in accordance with generally accepted accounting principles.
<PAGE>
(c) The Partnership recorded its investments in real estate at the lower of
cost or fair value, and periodically assessed, but not less than on an annual
basis, possible impairment to the value of its properties. The General Partner
estimated the fair value of its properties based on the current sales price
less estimated closing costs. The General Partner had determined that no
impairment in value had occurred prior to the sales of the properties. The
General Partner considered 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 indicated otherwise.
(d) Deferred expenses consisted of loan refinancing fees which were amortized
over the terms of the respective agreements. Upon sale, any remaining balance
was recognized as debt extinguishment expense and classified as an
extraordinary item.
(e) The Partnership calculates the fair value of its financial instruments
based on estimates using present value techniques. The Partnership includes
this additional information in the notes to the financial statements when the
fair value is different than the carrying value of those financial instruments.
When the fair value reasonably approximates the carrying value, no additional
disclosure is made.
(f) For financial statement purposes, prior to 1997, the partners were
allocated income and loss in accordance with the provisions in the Partnership
Agreement. In order for the capital account balances to more accurately reflect
the partners' remaining economic interests in the Partnership Agreement, the
income (loss) allocations have been adjusted.
(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 primarily 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.
(i) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles.
(j) Statement of Financial Accounting Standards, No. 128, "Earnings per Share"
was adopted by the Partnership effective for the year ended December 31, 1997
and has been applied to the prior earnings period presented in the financial
statements. Since the Partnership has no dilutive securities, there is no
difference between basic and diluted net income (loss) per Limited Partnership
Interest.
(k) Certain reclassifications of prior years information were made to conform
to the 1998 presentation.
<PAGE>
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.
The Partnership Agreement generally provides that the General Partner will be
allocated 1% of the profits and losses. For financial statement purposes, prior
to 1997, the partners were allocated income and loss in accordance with the
provisions in the Partnership Agreement. In order for the capital account
balances to more accurately reflect the partners' remaining economic interests
in the Partnership Agreement, the income (loss) allocations have been adjusted.
To the extent Net Cash Receipts were distributed, the General Partner was
entitled to 10% of the Net Cash Receipts (9% being its management fee and 1%
being its distributive share), which payment was subordinated to certain levels
of return to holders of Interests as specified by the Partnership Agreement.
The Net Cash Proceeds resulting from the sales of the Partnership's properties
which were available for distribution were distributed only to holders of
Interests. Such amounts were to be distributed until such time as holders of
Interests received an amount equal to their Original Capital plus certain
levels of return, as specified by the Partnership Agreement. Only after such
returns were made to the holders of Interests would the General Partner have
received 15% of further distributed Net Cash Proceeds. Since the required
subordination levels were not met, the General Partner has not received any
distributions of Net Cash Receipts or Net Cash Proceeds during the lifetime of
the Partnership.
5. Mortgage Notes Payable:
During 1997 and 1996, the Partnership incurred and paid interest expense on
mortgage notes payable of $555,453 and $1,333,538 respectively.
6. Management Agreements:
The Partnership's properties were managed by a third party management company
prior to the sale of the properties. These management agreements provided 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 loss for 1998 in the financial statements is $4,910 more than the tax
loss for the same period.
<PAGE>
8. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/98 12/31/97 12/31/96
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------- ------ ------- ------ ------- -------
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $8,895 $3,524 $19,966 $10,873 $11,945 $10,349
Data processing 2,328 872 4,074 1,456 2,421 None
Legal 9,785 4,119 17,165 9,347 8,250 7,148
Portfolio management 22,201 13,570 41,362 22,181 38,528 33,380
Other 7,569 None 13,900 7,569 10,136 2,852
Prior to May 1995, the Partnership participated in an insurance deductible
program with other affiliated partnerships in which the program paid claims up
to the amount of the deductible under the master insurance policy for its
properties. The program was administered by an affiliate of the General Partner
which received no fee for administering the program. However, the General
Partner was reimbursed for program expenses. The Partnership paid premiums to
the deductible insurance program relating to claims for periods prior to May 1,
1995 of $7,231 in 1996.
9. Property Sales:
(a) In July 1997, the Partnership sold the Walnut Hills - Phase I Apartments
in an all cash sale for $4,528,312. The Partnership used the proceeds from the
sale and $753,848 of the proceeds from the sale of Walnut Hills - Phase II
Apartments, as described below, to repay the $5,059,440 first mortgage loan in
full and in addition, the Partnership paid a prepayment penalty of $101,189 and
$121,531 in selling costs. The basis of the property was $1,734,932, which is
net of accumulated depreciation of $1,577,926. For financial statement
purposes, the Partnership recognized a gain of $2,671,849 from the sale of this
property.
(b) In July 1997, the Partnership sold the Walnut Hills - Phase II Apartments
in an all cash sale for $5,471,688. From the proceeds of the sale, the
Partnership paid $1,871,300 to the third party mortgage holder in full
satisfaction of the first mortgage loan, a prepayment penalty of $37,426 and
$146,767 in selling costs. In addition, $753,848 of the proceeds was used to
repay the first mortgage loan of the Walnut Hills - Phase I Apartments, as
described above. The basis of the property was $2,248,987, which is net of
accumulated depreciation of $1,594,163. For financial statement purposes, the
Partnership recognized a gain of $3,075,934 from the sale of this property.
<PAGE>
(c) In June 1997, the Partnership sold the Cedar Creek - Phase I Apartments in
an all cash sale for $3,232,653. From the proceeds of the sale, the Partnership
paid $2,305,542 to the third party mortgage holder in full satisfaction of the
first mortgage loan, $46,111 in prepayment penalties and $78,403 in selling
costs. The basis of the property was $1,303,018, which is net of accumulated
depreciation of $2,285,616. For financial statement purposes, the Partnership
recognized a gain of $1,851,232 from the sale of this property.
(d) In June 1997, the Partnership sold the Cedar Creek - Phase II Apartments in
an all cash sale for $3,967,347. From the proceeds of the sale, the Partnership
paid $2,742,381 to the third party mortgage holder in full satisfaction of the
first mortgage loan, $54,847 in prepayment penalties and $96,138 in selling
costs. The basis of the property was $1,834,642, which is net of accumulated
depreciation of $3,043,064. For financial statement purposes, the Partnership
recognized a gain of $2,036,567 from the sale of this property.
(e) 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.
10. Extraordinary Item:
(a) The Partnership wrote off the remaining unamortized deferred financing fees
totaling $268,717 and paid prepayment penalties totaling $239,573 in connection
with the 1997 sales of the Cedar Creek - Phases I and II Apartments and the
Walnut Hills - Phases I and II Apartments. These amounts were recognized as an
extraordinary item and classified as debt extinguishment expense for financial
statement purposes.
(b) In 1996, the Partnership wrote off the remaining unamortized deferred
financing fees in the amount of $102,943 in connection with the sale of the
Greentree Village Apartments. This amount was recognized as an extraordinary
item and was classified as debt extinguishment expense.
11. Contingency:
The Partnership is currently involved in a lawsuit Masri vs. Lehman Brothers,
Inc., et. al., whereby the Partnership and certain affiliates were named as
defendants alleging claims involving certain state securities and common 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 this action. A plaintiff class has not been
certified in the action and, no determinations upon any significant issues have
been made. It is not determinable at this time how the outcome of this action
will impact the remaining cash reserves of the Partnership. The Partnership
believes it has meritorious defenses to contest the claims.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 883
<SECURITIES> 0
<RECEIVABLES> 4
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 887
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 887
<CURRENT-LIABILITIES> 50
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 836
<TOTAL-LIABILITY-AND-EQUITY> 887
<SALES> 0
<TOTAL-REVENUES> 49
<CGS> 0
<TOTAL-COSTS> 29
<OTHER-EXPENSES> 140
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (120)
<INCOME-TAX> 0
<INCOME-CONTINUING> (120)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (120)
<EPS-PRIMARY> (4.00)
<EPS-DILUTED> (4.00)
</TABLE>
