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, 1999
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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
- ------------------------------- -------------------
(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 ]
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 its
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 to 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 Masri 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
such contingencies. There can be no assurances as to the time frame for the
conclusion of all contingencies.
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, 1999, the Registrant did not own any properties.
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
- -------------------------
Raymond 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 Partnership, twelve additional
limited partnerships which were sponsored by The Balcor Company, three limited
partnerships sponsored by the predecessor of Lehman Brothers, Inc., (together
with the Partnership, 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. No activity occurred on this matter
during 1999.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. Management of each of the defendants believes they
have meritorious defenses to contest the claims.
Madison Partnership Liquidity Investors XX, et al. vs. The Balcor Company, et
- -----------------------------------------------------------------------------
al.
- ---
Sandra Dee vs. The Balcor Company, et al.
- -----------------------------------------
On May 7, 1999, a proposed class action complaint was filed and on May 13, 1999
was served on the defendants, Madison Partnership Liquidity Investors XX, et
al. vs. The Balcor Company, et al. (Circuit Court, Chancery Division, Cook
County, Illinois, Docket No. 99CH 08972). The General Partner of the
Partnership, the general partners of twenty-one additional limited partnerships
which were sponsored by The Balcor Company, The Balcor Company and one
individual are named as defendants in this action. The Partnership and the
twenty-one additional limited partnerships are referred to herein as the
"Affiliated Partnerships". Plaintiffs are entities that initiated tender offers
to purchase units and, in fact, purchased units in eleven of the Affiliated
Partnerships.
On June 1, 1999, a proposed class action complaint was filed and on August 16,
1999 was served on the defendants, Sandra Dee vs. The Balcor Company, et al.
(Circuit Court, Chancery Division, Cook County, Illinois, Docket No. 99CH
08123). This complaint is identical in all material respects to the Madison
Partnership Liquidity Investors XX, et al. vs. The Balcor Company et al.
complaint filed in May 1999. The defendants filed on September 15, 1999 a
motion to consolidate the Dee case with the Madison Partnership case. On
September 20, 1999, the motion was granted and this case was consolidated with
the Madison Partnership case.
The complaints allege breach of fiduciary duties and breach of contract under
the partnership agreements for each of the Affiliated Partnerships. complaints
seek the winding up of the affairs of the Affiliated Partnerships, the
establishment of a liquidating trust for each of the Affiliated Partnerships
until a resolution of all contingencies occurs, the appointment of an
independent trustee for each such liquidating trust and the distribution of a
portion of the cash reserves to limited partners. The complaints also seek
compensatory damages, punitive and exemplary damages, and costs and expenses in
pursuing the litigation.
The defendants filed motions to dismiss the complaints on July 14, 1999 and on
September 15, 1999. On January 19, 2000 a hearing on the motions was held and
the class allegations in the complaints were struck regarding the Partnership
and ten of the Affiliated Partnerships in which plaintiffs do not own
interests. In all other respects, the motions to dismiss were denied. While the
court directed the plaintiffs to file an amended complaint by February 18,
2000, as of this date they have yet to do so.
The defendants intend to vigorously contest this action. No class has been
certified as of this date.
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 1999.
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, 1999, the number of record holders of Limited Partnership
Interests of the Registrant was 2,793.
Item 6. Selected Financial Data
- -------------------------------
Year ended December 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- -------- ---------- -------- --------
Total income $41,311 $49,015 $2,054,040 $5,117,065 $6,043,472
(Loss) income
before gain
on sales of
properties and
extraordinary
item (66,660) (119,947) (717,805) (444,820) 135,417
Net (loss) income (66,660) (119,947) 8,409,487 5,574,237 135,417
Net (loss) income
per Limited
Partnership
Interest-Basic
and Diluted (2.22) (4.00) 275.35 183.92 4.47
Total assets 823,637 886,720 1,028,006 10,225,202 12,335,453
Mortgage notes
payable None None None 12,028,777 15,212,762
Distributions
per Limited
Partnership
Interest (A) None None 167.00 147.50 100.57
(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.
Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
- ---------------------
Operations
- ----------
Summary of Operations
- ---------------------
The operations of Balcor Equity Properties Ltd.-VIII (the "Partnership") in
1999 and 1998 consisted primarily of administrative expenses which were
partially offset by interest income earned on short-term investments.
Primarily as a result of lower administrative expenses in 1999, the
Partnership's net loss decreased during 1999 as compared to 1998. The
Partnership sold its four remaining properties in 1997 and recognized gains in
connection with the sales, which resulted in the Partnership recognizing net
income during 1997. Further discussion of the Partnership's operations is
summarized below.
1999 Compared to 1998
- ---------------------
Primarily as a result of lower interest rates during 1999, interest income on
short-term investments decreased during 1999 as compared to 1998.
During 1998, the Partnership paid property operating expenses related to three
of the properties sold in 1997.
Primarily due to a decrease in accounting and legal fees, administrative
expenses decreased during 1999 as compared to 1998.
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 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.
Primarily as a result of lower accounting, data processing, portfolio
management and bank fees, administrative expenses decreased during 1998 as
compared to 1997.
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.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $64,000 as of
December 31, 1999 as compared to December 31, 1998 due to cash used in
operating activities for the payment of administrative expenses, which was
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 its
interests in real estate. The Partnership sold its final real estate investment
in July 1997. The Partnership has retained a portion of the cash from the
property sales 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 Masri
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 such contingencies. There can be no assurances as to
the time frame for the conclusion of all contingencies.
The Partnership made a distribution of Net Cash Proceeds in 1997 totaling
$167.00 per Limited Partnership Interest. See Statement of Partners' Capital
(Deficit) for additional information. The Partnership made no distributions in
1999 or 1998.
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 believes that its key vendors were Year 2000 compliant with
respect to the Partnership's operations as of December 31, 1999 and that there
was no material effect on the business, financial position or results of
operations of the Partnership related to Year 2000 issues.
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.
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 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, 1999 December 31, 1998
----------------------- ---------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
------------ -------- ----------- --------
Total assets $823,637 $4,420,690 $886,720 $4,484,666
Partners' (deficit)
capital accounts:
General Partner (20,636) (13,264) (20,636) (13,264)
Limited Partners 790,352 4,380,026 857,012 4,447,581
Net (loss) income:
General Partner None None None 7,372
Limited Partners (66,660) (67,555) (119,947) (122,409)
Per Limited Part-
nership Interest (2.22)(A) (2.25) (4.00)(A) (4.08)
(A) Amount represents basic and diluted net loss 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.
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 Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 52) 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 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.
Jayne A. Kosik (age 42) 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.
(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 1999 except that Mr. Meador is named, in his capacity as an
officer of Balcor, as a defendant in the Madison/Dee lawsuit described in "Item
3. Legal Proceedings".
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.
In addition, Balcor LP Corp., an affiliate of the General Partner, holds title
to 52 Limited Partnership Interests in the Partnership due exclusively to
instances in which Limited Partners abandoned title to their Limited
Partnership Interests. Balcor LP Corp. is a nominee holder only of such
Interests and has disclaimed any economic or beneficial ownership in said
Interests. All distributions of cash payable with respect to such Interests
held by Balcor LP Corp. are returned to the Partnership for distribution to
other Limited Partners in accordance with the Partnership Agreement.
(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
- -------------------------------------------------------
(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.
PART IV
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 in Exhibit 4 to Amendment
No. 2 to the Registrant's Registration Statement on Form S-11 dated February
26, 1980 (Registration No. 2-63821) and Form of Confirmation regarding
Interests in the Registrant set forth as Exhibit 4.2 to the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1992 (Commission File No. 0-9541)
are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1999 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1999.
(c) Exhibits: See Item 14(a)(3) above.
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 28, 2000
--------------------
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 28, 2000
- -------------------- --------------
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 28, 2000
- -------------------- --------------
Jayne A. Kosik
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1999 and 1998
Statements of Partners' Capital (Deficit), for the years ended December 31,
1999, 1998 and 1997
Statements of Income and Expenses, for the years ended December 31, 1999, 1998
and 1997
Statements of Cash Flows, for the years ended December 31, 1999, 1998 and 1997
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
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, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
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 auditing standards generally accepted in the United States,
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 occurrence of certain
events, including the disposition of all its interests in real estate. The
Partnership no longer has an ownership interest in any real estate investment.
As described in Note 11, the Partnership has contingencies related to
litigation. Upon resolution of the litigation contingency matters, the
Partnership intends to cease operations and dissolve.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 28, 2000
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
1999 1998
--------------- ---------------
Cash and cash equivalents $ 819,148 $ 882,940
Accounts and accrued interest receivable 4,489 3,780
--------------- ---------------
$ 823,637 $ 886,720
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 21,174 $ 28,259
Due to affiliates 32,747 22,085
--------------- ---------------
Total liabilities 53,921 50,344
--------------- ---------------
Commitments and contingencies
Limited Partners' capital
(30,005 Interests issued and outstanding) 790,352 857,012
General Partner's deficit (20,636) (20,636)
--------------- ---------------
Total partner's capital 769,716 836,376
--------------- ---------------
$ 823,637 $ 886,720
=============== ===============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL(DEFICIT)
for the years ended December 31, 1999, 1998 and 1997
Partners' Capital(Deficit) Accounts
--------------------------------------------
General Limited
Total Partner Partners
-------------- -------------- --------------
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
Net loss for the year
ended December 31, 1999 (66,660) (66,660)
-------------- -------------- --------------
Balance at December 31, 1999 $ 769,716 $ (20,636) $ 790,352
============== ============== ==============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1999 1998 1997
------------ ------------ ------------
First Quarter None None None
Second Quarter None None None
Third Quarter None None $167.00
Fourth Quarter None None None
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997
-------------- -------------- --------------
Income:
Rental and service $ 1,904,016
Interest on short-term
investments $ 41,311 $ 49,015 133,199
Other 16,825
-------------- -------------- --------------
Total income 41,311 49,015 2,054,040
-------------- -------------- --------------
Expenses:
Interest on mortgage notes
payable 555,453
Depreciation 231,604
Amortization of deferred
expenses 25,170
Property operating 29,219 1,339,012
Real estate taxes 234,376
Property management fees 95,944
Administrative 107,971 139,743 290,286
-------------- --------------- -------------
Total expenses 107,971 168,962 2,771,845
-------------- --------------- -------------
Loss before gain on sales
of properties and
extraordinary item (66,660) (119,947) (717,805)
Gain on sales of properties 9,635,582
-------------- ---------------- ------------
(Loss) income before
extraordinary item (66,660) (119,947) 8,917,777
Extraordinary item:
Debt extinguishment
expense (508,290)
-------------- -------------- --------------
Net (loss) income $ (66,660) $ (119,947) $ 8,409,487
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1999, 1998 and 1997
(Continued)
1999 1998 1997
-------------- -------------- --------------
(Loss) income before
extraordinary item allocated
to General Partner None None $ 156,594
============== ============== ==============
(Loss) income before
extraordinary item allocated
to Limited Partners $ (66,660) $ (119,947) $ 8,761,183
============== ============== ==============
(Loss) income before
extraordinary item per
Limited Partnership
Interest (30,005 issued
and outstanding) - Basic
and Diluted $ (2.22) $ (4.00) $ 291.99
============== ============== ==============
Extraordinary item
allocated to General
Partner None None $ (8,927)
============== ============== ==============
Extraordinary item
allocated to Limited
Partners None None $ (499,363)
============== ============== ==============
Extraordinary item per
Limited Partnership
Interest (30,005 issued
and outstanding) - Basic
and Diluted None None $ (16.64)
============== ============== ==============
Net (loss) income allocated to
General Partner None None $ 147,667
============== ============== ==============
Net (loss) income allocated
to Limited Partners $ (66,660) $ (119,947) $ 8,261,820
============== ============== ==============
Net (loss) income per Limited
Partnership Interest
(30,005 issued and
outstanding) - Basic
and Diluted $ (2.22) $ (4.00) $ 275.35
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997
-------------- -------------- --------------
Operating activities:
Net (loss) income $ (66,660) $ (119,947) $ 8,409,487
Adjustments to reconcile
net (loss) income to net
cash used in operating
activities:
Gain on sales of
properties (9,635,582)
Debt extinguishment
expense 268,717
Depreciation of
properties 231,604
Amortization of
deferred expenses 25,170
Net change in:
Escrow deposits -
unrestricted 742,334
Accounts and
accrued interest
receivable (709) 21,314 169,069
Prepaid expenses 53,417
Accounts payable (7,085) 8,002 (24,863)
Due to affiliates 10,662 (29,341) (2,303)
Accrued liabilities (463,870)
Security deposits (76,035)
--------------- --------------- ------------
Net cash used in
operating activities (63,792) (119,972) (302,855)
--------------- --------------- ------------
Investing activities:
Proceeds from sales of
properties 17,200,000
Payment of selling costs (442,839)
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
--------------
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES, LTD. - VIII
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
(Continued)
1999 1998 1997
--------------- ------------- --------------
Financing activities:
Distribution to
Limited Partners $ (5,010,835)
Repayment of mortgage
notes payable (11,978,663)
Principal payments on
mortgage notes payable (50,114)
--------------
Net cash used in
financing activities (17,039,612)
--------------
Net change in cash and
cash equivalents $ (63,792) $ (119,972) (585,306)
Cash and cash equivalents
at beginning of year 882,940 1,002,912 1,588,218
--------------- -------------- -------------
Cash and cash equivalents
at end of year $ 819,148 $ 882,940 $ 1,002,912
=============== ============== =============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES LTD.-VIII
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. 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 its
interests in real estate. The Partnership sold its final real estate investment
in July 1997. The Partnership has retained a portion of the cash from the
property sales 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 Masri
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 such contingencies. There can be no
assurances as to the time frame for the conclusion of all 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.
(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) In order for the capital account balances to more accurately reflect the
partners' remaining economic interests in the Partnership Agreement, the (loss)
income 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 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.
Since the Partnership has no dilutive securities, there is no difference
between basic and diluted net income (loss) per Limited Partnership Interest.
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. 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, the Partnership incurred and paid interest expense on mortgage
notes payable of $555,453.
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 1999 in the financial statements is $895 less than the tax
loss for the same period.
8. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/99 12/31/98 12/31/97
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
----- -------- ----- ------- ----- -------
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $7,726 $9,151 $8,895 $3,524 $19,966 $10,873
Data processing 4,798 4,905 2,328 872 4,074 1,456
Legal 3,713 4,427 9,785 4,119 17,165 9,347
Portfolio management 11,690 14,264 22,201 13,570 41,362 22,181
Other None None 7,569 None 13,900 7,569
Subject to the provisions of the partnership agreement, the Partnership has
agreed to advance the legal fees incurred by the General Partner in defending
the Madison Partnership lawsuit discussed in Note 11 of Notes to Financial
Statements.
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.
(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.
10. Extraordinary Item:
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.
11. Contingencies:
(a) 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.
(b) In May 1999, a lawsuit was filed, Madison Partnership Liquidity Investors
XX, et al. vs. The Balcor Company, et al. whereby the General Partner and
certain affiliates have been named as defendants. The plaintiffs are entities
that initiated tender offers to purchase and, in fact, purchased units in
eleven affiliated partnerships. The complaint alleges breach of fiduciary
duties and breach of contract under the partnership agreement and seeks the
winding up of the affairs of the Partnership, the establishment of a
liquidating trust, the appointment of an independent trustee for the trust and
the distribution of a portion of the cash reserves to limited partners. On June
1, 1999, a second lawsuit was filed and was served on August 16, 1999, Sandra
Dee vs. The Balcor Company, et al. The Dee complaint is virtually identical to
the Madison Partnership complaint and on September 20, 1999 was consolidated
into the Madison Partnership case. On January 19, 2000, a hearing was held on
the defendants' motion to dismiss the complaint; at the hearing the class
allegations were struck regarding eleven of the partnerships, including the
Partnership. The defendants intend to vigorously contest these actions. It is
not determinable at this time how the outcome of these actions will impact the
remaining cash reserves of the Partnership.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 819
<SECURITIES> 0
<RECEIVABLES> 4
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 824
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 824
<CURRENT-LIABILITIES> 54
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 770
<TOTAL-LIABILITY-AND-EQUITY> 824
<SALES> 0
<TOTAL-REVENUES> 41
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 108
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (67)
<INCOME-TAX> 0
<INCOME-CONTINUING> (67)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67)
<EPS-BASIC> (2.22)
<EPS-DILUTED> (2.22)
</TABLE>
