SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - -----
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - -----
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-11127
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BALCOR REALTY INVESTORS LTD.-82
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3139801
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
- - ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
--------------
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
----- -----
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1994 and December 31, 1993
(UNAUDITED)
ASSETS
1994 1993
-------------- --------------
Cash and cash equivalents $ 4,192,719 $ 4,448,617
Restricted investments 1,230,000 1,230,000
Escrow deposits 1,282,216 1,650,613
Accounts and accrued interest receivable 118,665 86,451
Wrap-around note receivable 6,150,000 6,150,000
Deferred gain on sale of property (3,244,180) (3,244,180)
Deferred expenses, net of accumulated
amortization of $157,326 in 1994 and
$287,744 in 1993 588,048 662,981
-------------- --------------
10,317,468 10,984,482
-------------- --------------
Investment in real estate, at cost:
Land 3,452,798 5,035,382
Buildings and improvements 25,174,333 33,363,751
-------------- --------------
28,627,131 38,399,133
Less accumulated depreciation 11,799,832 15,261,550
-------------- --------------
Investment in real estate, net of
accumulated depreciation 16,827,299 23,137,583
-------------- --------------
$ 27,144,767 $ 34,122,065
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 394,888 $ 427,380
Due to affiliates 130,550 66,931
Accrued liabilities, principally interest
and real estate taxes 396,548 778,752
Escrow liabilities 68,111 13,626
Security deposits 119,078 142,757
Purchase price, promissory and mortgage
notes payable 28,939,799 38,391,369
Mortgage note payable - affiliate 2,323,345
-------------- --------------
Total liabilities 30,048,974 42,144,160
Partners' capital (74,133 Limited Partnership
Interests issued and outstanding) (2,904,207) (8,022,095)
-------------- --------------
$ 27,144,767 $ 34,122,065
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1994 and 1993
(UNAUDITED)
1994 1993
-------------- --------------
Income:
Rental and service $ 5,472,818 $ 6,283,496
Interest on short-term investments 168,799 102,270
Interest on wrap-around note receivable 484,312 415,125
-------------- --------------
Total income 6,125,929 6,800,891
-------------- --------------
Expenses:
Interest on purchase price, promissory
and mortgage notes payable 2,201,129 2,858,566
Depreciation 653,725 809,255
Amortization of deferred expenses 74,933 51,751
Property operating 2,357,004 2,199,387
Real estate taxes 473,303 529,684
Property management fees 272,294 318,593
Administrative 371,056 329,017
-------------- --------------
Total expenses 6,403,444 7,096,253
-------------- --------------
Loss before net gains on sales of properties
and extraordinary item (277,515) (295,362)
Net gains on sales of properties 5,523,282 367,183
-------------- --------------
Income before extraordinary item 5,245,767 71,821
Extraordinary item:
Gain on forgiveness of debt 4,332,623
-------------- --------------
Net income $ 5,245,767 $ 4,404,444
============== ==============
Income (loss) before extraordinary item
allocated to General Partner $ 41,357 $ (11,096)
============== ==============
Income before extraordinary item allocated
to Limited Partners $ 5,204,410 $ 82,917
============== ==============
Income before extraordinary item
per Limited Partnership Interest
(74,133 issued and outstanding) $ 70.20 $ 1.12
============== ==============
Extraordinary item allocated to General
Partner None $ 43,326
============== ==============
Extraordinary item allocated to Limited
Partners None $ 4,289,297
============== ==============
Extraordinary item per Limited Partnership
Interest (74,133 issued and outstanding) None $ 57.86
============== ==============
Net income allocated to General Partner $ 41,357 $ 32,230
============== ==============
Net income allocated to Limited Partners $ 5,204,410 $ 4,372,214
============== ==============
Net income per Limited Partnership Interest
(74,133 issued and outstanding) $ 70.20 $ 58.98
============== ==============
Distribution to Limited Partners $ 127,879 None
============== ==============
Distribution per Limited Partnership
Interest outstanding $ 1.725 None
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1994 and 1993
(UNAUDITED)
1994 1993
-------------- --------------
Income:
Rental and service $ 1,724,633 $ 2,052,439
Interest on short-term investments 55,493 51,910
Interest on wrap-around note receivable 161,437 138,375
-------------- --------------
Total income 1,941,563 2,242,724
-------------- --------------
Expenses:
Interest on purchase price, promissory
and mortgage notes payable 641,360 924,787
Depreciation 195,486 257,757
Amortization of deferred expenses 18,514 17,250
Property operating 818,612 867,154
Real estate taxes 150,408 165,787
Property management fees 86,153 103,034
Administrative 121,478 90,625
-------------- --------------
Total expenses 2,032,011 2,426,394
-------------- --------------
Net loss $ (90,448) $ (183,670)
============== ==============
Net loss allocated to General Partner $ (4,522) $ (9,183)
============== ==============
Net loss allocated to Limited Partners $ (85,926) $ (174,487)
============== ==============
Net loss per Limited Partnership Interest
(74,133 issued and outstanding) $ (1.16) $ (2.35)
============== ==============
Distribution to Limited Partners $ 127,879 None
============== ==============
Distribution per Limited Partnership
Interest outstanding $ 1.725 None
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1994 and 1993
(UNAUDITED)
1994 1993
-------------- --------------
Operating activities:
Net income $ 5,245,767 $ 4,404,444
Adjustments to reconcile net income
to net cash provided by operating
activities:
Net gains on sales of properties (5,523,282) (367,183)
Gain on forgiveness of debt (4,332,623)
Depreciation of properties 653,725 809,255
Amortization of deferred expenses 74,933 51,751
Net change in:
Escrow deposits 208,353 (102,124)
Accounts and accrued interest
receivable (32,214) (2,853)
Accounts payable (32,492) (242,378)
Due to affiliates 63,619 (37,062)
Accrued liabilities (382,204) 15,378
Escrow liabilities 54,485 34,620
Security deposits (23,679) (485)
-------------- --------------
Net cash provided by operating activities 307,011 230,740
-------------- --------------
Investing activities:
Proceeds from sales of properties 7,897,882 11,664,858
Payment of selling costs (320,159) (120,599)
Improvements to properties (92,844)
Purchase of restricted investments (1,230,000)
-------------- --------------
Net cash provided by investing activities 7,577,723 10,221,415
-------------- --------------
Financing activities:
Distribution to Limited Partners (127,879)
Repayment of mortgage notes payable (5,530,000) (11,110,154)
Repayment of mortgage note payable -
affiliate (2,323,345)
Principal payments on purchase price,
promissory and mortgage notes payable (319,452) (243,966)
Deposits for mortgage loan refinancings (459,000)
Funding of capital improvement escrows (96,900)
Disbursements from capital improvement
escrows 256,944 33,285
-------------- --------------
Net cash used in financing activities (8,140,632) (11,779,835)
-------------- --------------
Net change in cash and cash equivalents (255,898) (1,327,680)
Cash and cash equivalents at beginning
of period 4,448,617 3,387,355
-------------- --------------
Cash and cash equivalents at end of period $ 4,192,719 $ 2,059,675
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the nine months and quarter
ended September 30, 1994, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1994 and 1993, the Partnership
incurred interest expense on non-affiliated purchase price, promissory and
mortgage notes payable of $2,158,692 and $2,673,570 and paid interest expense
of $2,118,168 and $2,632,561, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1994 are:
Paid
--------------------
Nine Months Quarter Payable
----------- -------- ---------
Property management fees $279,127 $85,176 $28,427
Reimbursement of expenses to
the General Partner, at cost:
Accounting 43,011 25,114 23,270
Data processing 18,398 9,798 26,024
Investor communications 13,664 7,978 5,713
Legal 11,457 6,690 7,747
Portfolio management 43,026 17,417 32,902
Other 11,352 6,628 6,467
In June 1994, the Partnership used cash reserves to repay the $2,323,345 note
payable related to the Songbird Phases I and II Apartments which was
outstanding from Balcor Real Estate Holdings, Inc. ("BREHI"), an affiliate of
the General Partner. The Partnership incurred interest expense of $42,437 and
$184,996 and paid interest expense of $72,120 and $206,003 on this loan during
the nine months ended September 30, 1994 and 1993, respectively.
The Partnership was required to post a $1,230,000 letter of credit as
additional collateral for the mortgage note payable collateralized by the
Eagles Pointe Apartments. An affiliate of the General Partner originally had
been providing a guarantee for this letter of credit. During 1993, the
Partnership pledged $1,230,000 from its cash reserves as cash collateral for
the letter of credit in place of the affiliate's guarantee. The amount pledged
as collateral is invested in short-term instruments pursuant to the terms of
the pledge agreement with the lending institution. Interest earned on this
amount accumulates for the benefit of the Partnership.
4. Property Sales:
a) In February 1994, the Partnership sold the Bemis Square Shopping Center,
including a leasehold interest in a portion of the land, for a sale price of
$4,350,000. The purchaser assumed the existing first mortgage loan in the
amount of $3,602,118. The Partnership paid $149,000 to two unaffiliated parties
as a brokerage commission and $10,275 in closing costs and received the
remaining $588,607 of sale proceeds. The basis of the property sold was
$1,815,309, net of accumulated depreciation of $1,579,016. For financial
statement purposes, the Partnership recognized a gain of $2,375,416 from the
sale of the property.
b) In May 1994, the Partnership sold the Via El Camino Apartments for a sale
price of $7,150,000. A portion of the sale proceeds was used to repay the
existing first mortgage of $5,530,000. The Partnership also paid $143,000 to an
unaffiliated party as a brokerage commission and $17,884 in closing costs and
received the remaining $1,459,116 of sale proceeds. The basis of the property
sold was $3,841,250, net of accumulated depreciation of $2,536,427. For
financial statement purposes, the Partnership recognized a gain of $3,147,866
from the sale of the property.
5. Subsequent Event:
In October 1994, the Partnership made a distribution of $127,879 ($1.725 per
Interest) to the holders of Limited Partnership Interests for the third quarter
of 1994.
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Realty Investors Ltd.-82 (the "Partnership") is a limited partnership
formed in 1981 to invest in and operate income-producing real property. The
Partnership raised $74,133,000 through the sale of Limited Partnership
Interests and utilized these proceeds to acquire fourteen real property
investments. From 1984 to 1994, eleven of these properties were sold or
relinquished through foreclosure. The Partnership continues to own the three
remaining properties.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1993 for a more complete understanding of
the Partnership's financial position.
Operations
- - ----------
Summary of Operations
- - ---------------------
The Partnership recognized net gains during 1993 and 1994 in connection with
the sales of four properties, and an extraordinary gain during 1993 due to the
discount received on the repayment of debt on the 1400 North Lake Shore Drive
Apartment Building. As a result of these significant events, the Partnership
recognized net income during the nine months ended September 30, 1994 and 1993
and a net loss during the quarters ended September 30, 1994 and 1993. Further
discussion of the Partnership's operations is summarized below.
1994 Compared to 1993
- - ---------------------
The sales of the Southgate and Bemis Square shopping centers and the Via El
Camino Apartments in June 1993, February 1994 and May 1994, respectively,
resulted in decreases in rental and service income, interest expense on
purchase price, promissory and mortgage notes payable, depreciation, property
operating expenses, real estate taxes and property management fees during the
nine months and quarter ended September 30, 1994 as compared to the same
periods in 1993. The Partnership recognized gains in connection with these
property dispositions and recognized a loss from the May 1993 sale of the 1400
North Lake Shore Drive Apartment Building, which had been in receivership since
June 1992. The Partnership also recognized an extraordinary gain due to the
discount received on the repayment of debt on the 1400 North Lake Shore Drive
Apartment Building.
An increase in rental collections at the Eagles Pointe Apartments due to higher
rental rates partially offset the above decrease in rental and service income.
The proceeds received from the October 1993 refinancings of the Balcones Woods
and Songbird Phases I and II apartment complexes and the above-mentioned
property sales, resulted in an increase in funds available for short-term
investments. This increase in funds available, combined with higher interest
rates, resulted in an increase in interest income on short-term investments
during the nine months and quarter ended September 30, 1994 when compared to
the same periods in 1993.
A scheduled increase in the interest rate on the wrap-around note
collateralized by the Meridian Hills Court Apartments caused an increase in
interest income on wrap-around note receivable during the nine months and
quarter ended September 30, 1994 when compared to the same periods in 1993.
A reduction in the interest rate in October 1993 on the note payable related to
the Songbird Phases I and II Apartments and the subsequent repayment of this
note in June 1994 contributed to the decrease in interest expense on purchase
price, promissory and mortgage notes payable due to the property dispositions.
Deferred fees paid in connection with the two October 1993 refinancings are
being amortized over the terms of the respective loan agreements, resulting in
an increase in amortization expense during the nine months and quarter ended
September 30, 1994 when compared to the same periods in 1993.
Higher expenditures at the Partnership's three remaining properties relating to
such items as landscaping, painting and floor and wall covering upgrades offset
the decrease in property operating expenses due to the property dispositions
and resulted in an overall increase in property operating expenses during the
nine months ended September 30, 1994 as compared to the same period in 1993.
Higher accounting and portfolio management fees resulted in an increase in
administrative expenses during the nine months and quarter ended September 30,
1994 when compared to the same periods in 1993.
Liquidity and Capital Resources
- - -------------------------------
The operating activities of the Partnership include the cash flow from
operations of the properties as discussed below, and interest income received
on the wrap-around note receivable and short-term investments, offset by
administrative costs. The net cash flow provided by investing activities
represents proceeds received from the sales of the Bemis Square Shopping Center
and Via El Camino Apartments less selling costs. These proceeds were partially
used in financing activities to repay the existing mortgage on the Via El
Camino Apartments, while the mortgage on the Bemis Square Shopping Center was
assumed by the purchaser. Other financing activities include principal payments
on mortgage notes payable, capital improvement escrow activity and a quarterly
distribution to Limited Partners. In addition, the Partnership used cash
reserves to repay the note payable related to the Songbird Phases I and II
Apartments in June 1994. As a result, the cash or near cash position of the
Partnership decreased as of September 30, 1994 when compared to December 31,
1993. Cash reserves are being retained for future requirements and may be
needed in connection with the Meridian Hills Court Apartments wrap-around note.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit is
considered to be significant if it exceeds $250,000 annually or 20% of the
property's rental and service income. For the nine months ended September 30,
1994 and 1993, the Balcones Woods and Songbird Phases I and II apartment
complexes generated positive cash flow. The Eagles Pointe Apartments generated
a marginal cash flow deficit during 1994 and a significant cash flow deficit
during 1993. The Eagles Pointe deficits are primarily a result of maintenance
and repairs expenditures deferred from prior years. The Bemis Square Shopping
Center and the Via El Camino Apartments, which were sold in 1994, generated
positive cash flow during the nine months ended September 30, 1993.
While the cash flow of certain of the Partnership's properties has improved,
the General Partner continues to pursue a number of actions aimed at improving
the cash flow of the Partnership's properties including improving property
operating performance, and seeking rent increases where market conditions
allow. Despite improvements in the local economies and rental markets where
certain of the Partnership's properties are located, the General Partner
believes that continued ownership of certain of the properties is in the best
interest of the Partnership in order to maximize potential returns to Limited
Partners. As a result, the Partnership will continue to own many of these
properties for longer than the holding period for the assets originally
described in the prospectus.
The Partnership received a wrap-around note in connection with the sale of
Meridian Hills Court Apartments. The wrap-around note matured in November 1994
and the borrower and the Partnership are currently negotiating an extension.
The underlying mortgage note payable related to this wrap-around note matures
in July 1996.
In February 1994, the Partnership sold the Bemis Square Shopping Center for a
sale price of $4,350,000. The purchaser acquired title to the property subject
to a loan which had an outstanding principal balance of $3,602,118 at closing.
From the proceeds of the sale, the Partnership paid $149,000 to two
unaffiliated parties as a brokerage commission and $10,275 in closing costs,
and received the remaining proceeds of $588,607. Neither the General Partner
nor any of its affiliates received a commission in connection with the sale of
the property.
In May 1994, the Partnership sold the Via El Camino Apartments for a sale price
of $7,150,000. A portion of the sale proceeds was used to repay the existing
first mortgage of $5,530,000. The Partnership also paid $143,000 to an
unaffiliated party as a brokerage commission and $17,884 in closing costs, and
received the remaining proceeds of $1,459,116. Neither the General Partner nor
any of its affiliates received a commission in connection with the sale of the
property.
Each of the Partnership's properties is owned through the use of third-party
mortgage loan financing and, therefore, the Partnership is subject to the
financial obligations required by such loans. As a result of the General
Partner's successful efforts to obtain loan refinancings, as well as the
repayment of certain loans with proceeds from property sales and cash reserves,
the Partnership has no third party financing related to its properties which
matures prior to 1998.
In October 1994, the Partnership made a distribution of $127,879 ($1.725 per
Interest) to the holders of Limited Partnership Interests for the third quarter
of 1994, representing available Net Cash Receipts. This distribution level is
consistent with the second quarter of 1994, when distributions to Limited
Partners were reinstated. To date, investors have received distributions
totaling $328.45 per $1,000 Interest as well as certain tax benefits. The
General Partner expects to continue quarterly distributions to Limited Partners
based on the current performance of the Partnership's properties. However,
future distributions will depend on continued cash flow from the Partnership's
remaining properties, the repayment or extension of the Meridian Hills Court
Apartments wrap-around note receivable, and proceeds from future property
sales, as to all of which there can be no assurances.
On November 4, 1994, The Balcor Company completed the sale of the assets of
Allegiance Realty Group, Inc. to an unaffiliated company, Insignia Allegiance
Management, Inc. ("Insignia"), which is based in Greenville, South Carolina. As
a result of this transaction, Insignia has assumed the management of the
Partnership's properties. This transaction is not expected to result in any
material change to the property management fees paid by the Partnership.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits:
- - ------------
(4) Certificate of Limited Partnership set forth as Exhibit 4.1 to Amendment
No. 1 to the Registrant's Registration Statement on Form S-11 dated December
11, 1981 (Registration No. 2-74358), 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. 0-11127)
are incorporated herein by reference.
(10) Material Contracts:
(i) The Agreement of Sale and attachments thereto and the Escrow Agreement
relating to the sale of 1400 North Lake Shore Drive Apartment Building,
Chicago, Illinois included as Exhibit 10(b) to the Registrant's Report on Form
10-K for the year ended December 31, 1992 are incorporated herein by reference.
(ii) The Agreement of Sale of Via El Camino Apartments, Phoenix, Arizona,
included as Exhibit 2 to the Registrant's Report on Form 8-K dated April 13,
1994 is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1994 is attached hereto.
(b) Reports on Form 8-K:
- - -----------------------
No reports were filed on Form 8-K during the quarter ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR REALTY INVESTORS LTD.-82
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Partners-XI, the General Partner
By: /s/Allan Wood
-----------------------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer (Principal
Accounting and Financial Officer) of Balcor
Partners-XI, the General Partner
Date: November 11, 1994
--------------------------
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