UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-11127
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BALCOR REALTY INVESTORS LTD.-82
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(Exact name of registrant as specified in its charter)
Illinois 36-3139801
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Rd.
Bannockburn, IL 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
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Balcor Realty Investors Ltd.-82 (the "Registrant") is a limited partnership
formed in 1981 under the laws of the State of Illinois. The Registrant raised
$74,133,000 from sales of Limited Partnership Interests. The Registrant's
operations currently consist exclusively of investment in and operation of real
property, and all financial information included in this report relates to this
industry segment.
The Registrant utilized the net offering proceeds to acquire fourteen real
property investments. The Registrant has since disposed of thirteen of these
properties. As of December 31, 1996, the Registrant owned one property
described under Item 2 "Property". The Partnership Agreement provides that the
proceeds of any sale or refinancing of the Registrant's properties will not be
reinvested in new acquisitions.
The Registrant's remaining property, Balcones Woods Apartments, is subject to
certain competitive conditions in the market in which it is located. See Item
7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" for additional information.
Real estate values, especially for good quality, well located property,
increased significantly during 1996 due to a combination of readily available
capital, low interest rates, and decreased vacancy rates resulting from steady
demand and an acceptable level of new construction. While 1996 proved to be an
excellent year to sell real estate, projected yields by buyers on new
acquisitions have declined significantly due to competition and rising prices.
Although there will be variances by asset class and geographic area, the
investment climate is expected to remain strong for 1997. However, values
could begin to level off as they approach replacement cost triggering new
construction and an increase in capitalization rates.
The investment market for apartments was excellent during 1996 due to a number
of factors. Investor interest was strong, driven primarily by institutions,
such as Real Estate Investment Trusts which aggressively expanded their
portfolios and pension funds viewed apartments as an attractive asset class due
to their perceived low volatility and the emergence of large professional
property management companies. Operationally, existing apartment properties
registered on a national basis occupancy in the mid 90's and rental rate
increases of 3-4% in 1996. While above the rate of inflation, the rate of
rental growth in 1996 was below that of the previous two years suggesting that
the apartment cycle may have plateaued, especially as the impact of new
construction in many areas is being felt. While 1997 is projected to be
another profitable year, values should begin to level off as capitalization
rates move upward continuing a trend which began during the second half of
1996.
<PAGE>
During September and October of 1996, the Registrant sold the Songbird Phase I
& II Apartments and Eagles Pointe Apartments in all cash sales for $10,700,000
and $11,075,000, respectively. See Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations Liquidity and Capital
Resources".
During March 1997, the Registrant sold the Balcones Woods Apartments for
$15,800,000. See Other Information, below, and Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of Operations Liquidity and
Capital Resources".
The Registrant sold its remaining property during 1997. The timing of the
termination of the Registrant and final distribution of cash will depend upon
the nature and extent of liabilities and contingencies which exist or may
arise. Such contingencies may include legal and other fees stemming from
litigation involving the Registrant including, but not limited to, the Lenore
Klein case discussed in Item 3 "Legal Proceedings". In the absence of any such
contingency, the reserves will be distributed within twelve months of the last
property being sold. In the event a contingency arises, reserves may be held by
the Registrant for a longer period of time.
The Registrant, by virtue of its ownership of real estate, is subject to
federal and state laws and regulations covering various environmental issues.
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental issues and to conduct tests for
environmental contamination as appropriate. The General Partner is not aware of
any potential liability due to environmental issues or conditions that would be
material to the Registrant.
The officers and employees of Balcor Partners-XI, the General Partner of the
Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Other Information
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Balcones Woods Apartments
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As previously reported, on February 11, 1997, a joint venture (the "Joint
Venture") in which the Partnership is the general partner and the original
seller of the property (the "JV Partner") is the limited partner, contracted to
sell Balcones Woods Apartments, Austin, Texas, to an unaffiliated party,
Mid-America Apartments of Texas, L.P., a Texas limited partnership, for a sale
price of $15,800,000. The Partnership and the JV Partner hold interests in the
Joint Venture of 80% and 20%, respectively. The purchaser assigned its rights
under the agreement of sale to an affiliate, Mid-America Apartments of Austin
L.P., and the sale closed on March 18, 1997. The purchaser was unable to obtain
the consent of the first mortgage holder to its assumption of the first
mortgage loan, and from the proceeds of the sale, the Joint Venture repaid the
outstanding balance of the first mortgage loan of $9,113,278.
<PAGE>
In addition, the Joint Venture paid $316,000 as a brokerage commission to an
affiliate of the third party providing property management services for the
property, and $53,746 in closing costs. The Joint Venture received the
remaining proceeds of approximately $6,317,000. Pursuant to the terms of the
Joint Venture agreement, the Partnership received all sale proceeds. Of such
proceeds, $200,000, will be retained by the Joint Venture and will not be
available for use or distribution by the Joint Venture until 60 days after the
closing.
Item 2. Property
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As of December 31, 1996, the Registrant owns one property described below, in
fee simple.
Location Description of Property
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Austin, Texas * Balcones Woods Apartments: a 384-unit
apartment complex located on approximately
23 acres.
* Owned by the Registrant through a joint venture with the seller. This
property was sold during 1997. See Note 16 of Notes to the Financial
Statements for additional information.
This property is held subject to a mortgage loan as described in Note 6 of
Notes to the Financial Statements.
The average occupancy rates and effective average rent per unit for each of the
last five years for the property owned by the Registrant at December 31, 1996,
are described below.
1996 1995 1994 1993 1992
Balcones Woods
Occupancy rate 93% 96% 98% 95% 99%
Effective rent $659 $659 $630 $611 $523
Apartment units in this property are rented with leases of one year or less,
with no tenant occupying greater than ten percent of the property. Real estate
taxes incurred in 1996 for this property totaled $310,641.
The Federal tax basis of the Registrant's property was $9,500,440 as of
December 31, 1996. For Federal income tax purpose, the acquisition costs of the
property are depreciated over a useful life ranging from 19 to 30 years, using
the ACRS method. Other minor assets are depreciated over their applicable
recovery periods.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding its real
property investment.
<PAGE>
Item 3. Legal Proceedings
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On August 30, 1996, a proposed class action complaint was filed, Lenore Klein
vs. Lehman Brothers, Inc., et al., Superior Court of New Jersey, Law Division,
Union County, Docket No. Unn-L-5162-96). The Registrant, additional limited
partnerships which were sponsored by The Balcor Company (together with the
Partnership, the _Affiliated Partnerships_), American Express Company, Lehman
Brothers, Inc., additional limited partnerships sponsored by the predecessor of
Lehman Brothers, Inc. (together with the Registrant and the Affiliated
Partnerships, the "Defendant Partnerships_) and Smith Barney Holdings, Inc. are
the named defendants in the action. The complaint was amended on October 18,
1996 to add additional plaintiffs. The amended complaint alleges, among other
things, common law fraud and deceit, negligent misrepresentation, breach of
contract, breach of fiduciary duty and violation of certain New Jersey statutes
relating to the disclosure of information in the offering of limited
partnership interests in the Defendant Partnerships. The amended complaint
seeks judgment for compensatory damages equal to the amount invested in the
Defendant Partnerships by the proposed class plus interest; general damages for
injuries arising from the defendants' alleged actions; equitable relief,
including rescission, on certain counts; punitive damages; treble damages on
certain counts; recovery from the defendants of all profits received by them as
a result of their alleged actions relating to the Defendant Partnerships;
attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Registrant believes that it has meritorious
defenses to contest the claims. It is not determinable at this time whether or
not an unfavorable decision in this action would have a material adverse impact
on the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of the Limited Partners of the Registrant
during 1996.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
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Matters
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There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding distributions, see Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations "Liquidity and Capital
Resources".
As of December 31, 1996, the number of record holders of Limited Partnership
Interests of the Registrant was 6,764.
Item 6. Selected Financial Data
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Year ended December 31,
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1996 1995 1994 1993 1992
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Total income $6,436,334 $7,524,577 $8,392,007 $9,010,969 $12,403,715
Income (loss) before
net gains on sales
of assets, write-
off of real estate
commissions and
extraordinary items 481,018 759,384 (100,170) (950,479) (1,003,918)
Net income 12,397,719 4,003,564 5,423,112 3,749,327 7,502,993
Net income
per Limited Part-
nership Interest 165.30 53.06 72.48 50.58 100.74
Total assets 11,702,17 120,030,290 26,891,815 34,122,065 44,314,508
Mortgage notes
payable 9,161,938 23,603,034 28,823,037 40,714,714 51,853,415
Cash distributions
per Limited Part-
nership Interest (A) 78.00 72.95 3.45 None None
(A) This amount includes distributions of original capital of $63.00 and $63.50
per Limited Partnership Interest during the years 1996 and 1995, respectively.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Operations
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Summary of Operations
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Balcor Realty Investors Ltd.-82 (the "Partnership") recognized net gains on
sales of properties during each of 1996, 1995 and 1994. The timing of these
transactions resulted in an increase in net income in 1996 as compared to 1995
and a decrease in net income in 1995 as compared to 1994. Further discussion of
the Partnership's operations is summarized below.
1996 Compared to 1995
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Rental and service income decreased in 1996 as compared to 1995 due to the
sales of the Songbird Apartments Phase I&II and the Eagles Pointe Apartments in
September and October 1996, respectively. The Partnership recognized gains on
the sales of these properties totaling $12,521,440.
Interest income on short-term investments decreased in 1996 as compared to 1995
due to lower average cash balances available for investments resulting from the
payment of special distributions to Limited Partners in 1995.
As a result of the February 1995 repayment of the Meridian Hills Court
Apartments wrap-around note, interest income on wrap-around note receivable
ceased and interest expense on mortgage notes payable decreased during 1996
when compared to 1995. In addition, the Partnership recognized the final
portion of the deferred gain of $3,244,180 related to this installment sale
during 1995. This gain had been deferred from 1986, when the property had been
sold for a cash down payment plus the wrap-around note.
In February 1996, the Partnership reached a settlement with the seller
regarding the original purchase of the Balcones Woods Apartments and recognized
$216,750 of settlement income relating primarily to amounts due from the seller
under the management and guarantee agreement as well as construction defects at
the property.
Interest expense decreased in 1996 as compared to 1995 due to the sales of the
Songbird Phase I & II Apartments and Eagles Pointe Apartments during 1996 and
the repayment of the Meridian Hills Court Apartments wrap-around note
during 1995.
Depreciation expense decreased in 1996 as compared to 1995 due to the sales of
the Songbird Phase I&II Apartments and the Eagles Pointe Apartments.
Amortization expense decreased in 1996 as compared to 1995 due to the sales of
the Songbird Phase I&II Apartments and the Eagles Pointe Apartments.
<PAGE>
As a result of the sale of two properties in 1996, property operating expenses
decreased by approximately $289,000 during 1996 as compared to 1995. This
decrease was partially offset by an increase in utilities, insurance, payroll
and operating expenses of approximately $218,000 at the Balcones Woods and the
Eagles Pointe Apartments.
Real estate tax expense decreased in 1996 as compared to 1995 due to the sales
of the Songbird Phase I&II Apartments and the Eagles Pointe Apartments by
approximately $85,000. This decrease was partially offset by an increase at the
Balcones Woods Apartments of approximately $38,000 due to increased tax rates.
Property management fees decreased in 1996 as compared to 1995 due to the sales
of the Songbird Phase I&II Apartments and the Eagles Pointe Apartments.
The Partnership incurred higher legal, consulting, printing and postage costs
in connection with a response to a tender offer during 1995. As a result,
administrative expenses decreased during 1996 as compared to 1995.
In connection with the sales of the Songbird Phase I&II Apartments and the
Eagles Pointe Apartments, the Partnership wrote off the remaining unamortized
deferred expenses in the amount of $192,960 and $2,969, respectively. In
addition, the Partnership recognized prepayment penalties in connection with
the sale of the Eagles Pointe Apartments of $423,933. These amounts were
recognized as an extraordinary item and classified as debt extinguishment
expenses in 1996.
1995 Compared to 1994
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The Partnership sold the Bemis Square Shopping Center and the Via El Camino
Apartments in February and May 1994, respectively, which resulted in gains of
$2,375,416 and $3,147,865, respectively.
Rental and service income decreased in 1995 as compared to 1994 due the sale of
the Bemis Square Center and the Via El Camino Apartments by approximately
$554,000. An increase in rental and service income at the Balcones Woods
Apartments, Eagles Pointe Apartments, and the Songbird Phase I&II Apartments
due to higher rental and occupancy rates partially offset the above decrease by
approximately $480,000.
Interest on short-term investments increased during 1995 as compared to 1994
due to an increase in interest rates earned on short-term investments.
During 1994, a liability related to tenant improvements at one of the disposed
properties was written-off and recognized as other income in the financial
statements.
The February 1995 repayment of the Meridian Hills Court Apartments wrap-around
note caused a decrease in interest income on wrap-around note receivable during
1995 when compared to 1994.
<PAGE>
Interest expense decreased in 1995 as compared 1994, due primarily to the sale
of Bemis Square Shopping Center and the Via El Camino Apartments. The repayment
by the Partnership of the mortgage note payable related to the Songbird Phases
I&II Apartments in June 1994 and the assumption by the borrower of the mortgage
note payable related to the Meridian Hills Court Apartments wrap-around note in
February 1995, further contributed to the decrease in interest expense on
mortgage notes payable.
Property operating expenses decreased in 1995 as compared to 1994, due
primarily to the sale of Bemis Square Shopping Center and the Via El Camino
Apartments. Decreased expenditures at the Eagles Pointe and Balcones Woods
Apartments relating to roof repairs and interior improvements further
contributed to the decrease in property operating expenses in 1995.
Depreciation and amortization expenses decreased in 1995 as compared to 1994
due to the sale of Bemis Square Shopping Center and the Via El Camino
Apartments.
Property management fees decreased in 1995 as compared to 1994 due to the sale
of Bemis Square Shopping Center and the Via El Camino Apartments.
Liquidity and Capital Resources
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The cash position of the Partnership increased by approximately $2,855,000 as
of December 31, 1996 as compared to December 31, 1995 primarily due to net cash
proceeds from the sales of the Songbird Phase I & II Apartments and the Eagles
Pointe Apartments in 1996. Cash flow of approximately $842,000 was provided by
operating activities during 1996 consisting primarily of cash provided by the
operation of the Partnership's properties, and settlement income received from
the seller of the Balcones Woods Apartments and was partially offset by the
payment of administrative expenses and loan prepayment penalties. Cash
provided by investing activities of approximately $15,329,000 consisted
primarily of proceeds received from the sales of the Songbird Phase I&II
Apartments and Eagles Pointe Apartments and proceeds from the redemption of a
restricted investment. Cash used in financing activities of approximately
$13,316,000 consisted of distributions to the Limited Partners, the repayment of
mortgage notes payable, principal payments on mortgage notes payable and
net disbursements received from capital improvement escrows. In addition,
in January 1997, the Partnership made a special distribution of $4,003,182
to the Limited Partners.
Short-term investments totaling $1,230,000 had been pledged as additional
collateral for the mortgage note payable relating to the Eagles Pointe
Apartments. The Partnership obtained a release of the funds in July 1996, upon
meeting certain criteria pursuant to the terms of the loan agreement.
The Partnership defines cash flow generated from its properties as an amount
equal to the property's revenue receipts less property related expenditures,
which include debt service payments. During 1996 and 1995, the Balcones Woods
Apartments generated positive cash flow. Both the Songbird Apartments Phase
I&II and the Eagles Pointe Apartments, which were sold in September 1996 and
October 1996, respectively, generated positive cash flow in 1995 and during
1996 prior to their sales. As of December 31, 1996, the occupancy rate at
Balcones Woods Apartments was 94%.
<PAGE>
Balcones Woods Apartments is located in the northwest sub-market of Austin,
Texas which contains in excess of 15,000 of the city's 130,000 multi-family
units. Balcones Woods Apartments competes with the mid-range product in the
sub-market. In 1996, the average occupancy at the property and the sub-market
for a similar product type averaged 93%. As Austin, Texas has continued to post
strong employment growth, the housing market has seen significant construction
of multi-family units with approximately 13,000 units built since 1994 and
another 8,000 currently being planned for 1997. The additional supply in the
market has caused rental rates to flatten and overall market occupancies to
drop from 97% in 1995 to 94% at year-end 1996.
As discussed below, during 1996, the Partnership sold the Songbird Phase I & II
Apartments and the Eagles Pointe Apartments, and during 1997, sold the Balcones
Woods Apartments. Available proceeds from the sale of the Balcones Woods
Apartments will be distributed to Limited Partners in 1997. The Partnership
will retain 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 exists or may arise. Such
contingencies may include legal and other fees stemming from litigation
involving the Partnership including, but not limited to, the Lenore Klein case
discussed in Item 3 "Legal Proceedings". In the absence of any such
contingency, the reserves will be paid within twelve months of the last
property sale. In the event a contingency arises, reserves may be held by the
Partnership for a longer period of time.
In September 1996, the Partnership sold the Songbird Apartments in an all cash
sale for $10,700,000. The purchaser of the Songbird Phase I & II Apartments
took title subject to the existing first mortgage loan in the amount of
$7,015,499. From the proceeds the Partnership paid $362,421 in selling costs.
Pursuant to the terms of the sale, the Partnership was required to hold back
$500,000 of the proceeds until January 1997. The full amount of the holdback
was released in January 1997. The remainder of the proceeds were distributed as
a special distribution to the Limited Partners in October 1996. See Note 11 of
Notes to Financial Statements for additional information.
In October 1996, the Partnership sold the Eagles Pointe Apartments in an all
cash sale for $11,075,000. From the proceeds of the sale, the Partnership paid
$7,066,611 to the third party mortgage holder in full satisfaction of the first
and second mortgage loans, and paid $298,233 in selling costs and $423,933 of
prepayment penalties. Pursuant to the terms of the sale, the Partnership was
required to hold back $250,000 of the proceeds until December 1996. The full
amount of the holdback was released in December 1996. The remainder of the
proceeds were distributed to the Limited Partners in January 1997. See Note 11
of Notes to Financial Statements for additional information.
In March 1997, the Partnership sold the Balcones Woods Apartments for
$15,800,000. The purchaser of the Balcones Woods Apartments took title subject
to the existing first mortgage loan in the amount of $9,113,278. From the
proceeds of the sale, the Partnership paid $369,746 in selling costs.
The remaining available proceeds will be distributed to the Limited Partners
in 1997. See Note 16 of Notes to Financial Statements for additional
information.
<PAGE>
The Partnership made distributions totaling $78.00, $72.95, and $3.45 per
Interest in 1996, 1995, and 1994, respectively. See Statement of Partner's
Capital for additional information. Distributions were comprised of $15.00 of
Net Cash Receipts and $63.00 of Net Cash Proceeds in 1996, $9.45 of Net Cash
Receipts and $63.50 of Net Cash Proceeds in 1995, and $3.45 of Net Cash
Receipts in 1994. Distributions of Net Cash Receipts increased in 1996 as
compared to 1995 and 1995 as compared to 1994 primarily due to improved
operations at the Partnership's properties. In addition, the Partnership made
special distributions of $62.00 and $63.50 per Interest in 1996 and 1995,
respectively, from the property sales in 1996 and the Meridian Hills
wrap-around note repayment in 1995.
In January 1997, the Partnership made a distribution of $4,003,182 ($54.00 per
Interest) to the holders of Limited Partnership Interests representing a
distribution of Net Cash Receipts of $4.00 per Interest for the fourth quarter
of 1996, and a special Net Cash Proceeds distribution of $50.00 per Interest
primarily from proceeds received in connection with the sale of Eagles Pointe
Apartments in October 1996. Including the January 1997 distribution, investors
have received distributions of Net Cash Receipts of $46.90 and Net Cash
Proceeds of $486.50, totaling $533.40 per $1,000 Interest, as well as certain
tax benefits. Future cash distributions will be made from proceeds generated
from the sale of Balcones Woods Apartments. In light of results to date,
will not recover all of their original investment.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or 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.
Item 8. Financial Statements and Supplementary Data
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See Index to Financial Statements and Financial Statement Schedule in this
Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
The net effect of the differences between the financial statements and the tax
returns is summarized as follows:
December 31, 1996 December 31, 1995
------------------------ ------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
----------- ----------- ----------- -----------
Total assets $11,702,171 $7,319,319 $20,030,290 $17,642,989
<PAGE>
Partners' capital
(deficit):
General Partner (3,630,301) (1,528,754) (3,773,519) (4,899,423)
Limited Partners 5,700,318 7,797,325 (485,660) (1,747,056)
Net income:
General Partner 143,218 3,370,669 70,411 581,966
Limited Partners 12,254,501 15,326,755 3,933,153 593,373
Per Limited
Partnership
Interest 165.30 206.75 53.06 8.00
Item 9. Changes in and Disagreements with Accountants on Accounting and
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Financial Disclosure
- --------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
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(a) Neither the Registrant nor Balcor Partners-XI, its General Partner, has a
Board of Directors.
(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Vice President James E. Mendelson
Senior Vice President John K. Powell, Jr.
Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 49) joined Balcor in July 1979. He is Chairman, President
and Chief Executive Officer and has responsibility for all ongoing day-to-day
activities at Balcor. He is a Director of The Balcor Company. He is also Senior
Vice President of American Express Company and is responsible for its real
estate operations worldwide. Prior to joining Balcor, Mr. Meador was employed
at the Harris Trust and Savings Bank in the commercial real estate division
where he was involved in various lending activities. Mr. Meador received his
M.B.A. degree from the Indiana University Graduate School of Business.
Alexander J. Darragh (age 42) joined Balcor in September 1988 and is
responsible for due diligence analysis and real estate advisory services for
Balcor and American Express Company. He also has supervisory responsibility for
Balcor's environmental matters. Mr. Darragh received masters' degrees in Urban
Geography from Queen's University and in Urban Planning from Northwestern
University.
James E. Mendelson (age 34) joined Balcor in July 1984 and is responsible for
Balcor's property sales activities. He also has supervisory responsibility for
Balcor's accounting, financial, treasury, investor services and investment
administration functions. From 1989 to 1995, Mr. Mendelson was Vice President -
Transaction Management and Vice President - Senior Transaction Manager and had
responsibility for various asset management matters relating to real estate
investments made by Balcor, including negotiations for the restructuring of
mortgage loan investments. Mr. Mendelson received his M.B.A. degree from the
University of Chicago.
John K. Powell, Jr. (age 46) joined Balcor in September 1985 and is responsible
for portfolio and asset management matters relating to Balcor's partnerships.
Mr. Powell also has supervisory responsibility for Balcor's risk management
function.
<PAGE>
He received a Master of Planning degree from the University of Virginia. Mr.
Powell has been designated a Certified Real Estate Financier by the National
Society for Real Estate Finance and is a full member of the Urban Land
Institute.
Jayne A. Kosik (age 39) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Managing Director of The Balcor
Company. Ms. Kosik is a Certified Public Accountant.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1996.
Item 11. Executive Compensation
- -------------------------------
The Registrant paid $2,419 in 1996 in respect to one of the executive officers
and directors of Balcor Partners - XI, the General Partner. The Registrant has
not paid and does not propose to pay any remuneration to the remaining
executive officers and directors of the General Partner. Certain of the
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 10 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 sole 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 82 6436.64 8.25%
Partnership Partners Limited
Interests Chicago, Partnership
Illinois Interests
Limited Metropolitan 3248.34 4.16%
Partnership Acquisition VII Limited
Interests Greensville Partnership
South Carolina Interests
While Metropolitan Acquisition VII individually owns less than 5% of the
Interests, for purposes of this Item 12, Metropolitan Acquisition VII is an
affiliate of WIG 82 Partners and, collectively, they own 12.41% of the
Interests.
(b) Neither Balcor Partners-XI nor its officers or partners own any Limited
Partnership Interests of the Registrant.
Relatives and affiliates of the officers and partners of the General Partner
own 25 Limited Partnership Interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
(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 10 of Notes to Financial Statements for additional information relating
to transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
- ------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements and Financial Statement Schedule in
this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement of Limited Partnership set forth as
Exhibit 3 to Post-Effective Amendment No. 1 to the Registrant's Registration
Statement on Form S-11 dated January 15, 1982 (Registration No. 2-74358), is
incorporated herein by reference.
(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 September 30, 1992 are incorporated herein
by reference.
(10)(a)(i) Agreement of Sale and attachments there to relating to the sale of
the Eagles Pointe Apartments, Norcross, Georgia previously filed as Exhibit
(2)(a) to the Registrant's Current Report on Form 8-K dated July 22, 1996, is
incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of Eagles
Pointe Apartments, Norcross, Georgia, previously filed as Exhibit (10)(a)(ii)
to the Registrant's Report on Form 10-Q for the quarter ended September 30,
1996, is incorporated herein by reference.
(b)(i) Agreement of sale relating to the sale of the Songbird Apartments, Phase
I and Phase II, San Antonio, Texas, previously filed as Exhibit (2)(b) to the
Registrant's Current Report on Form 8-K dated July 22, 1996, is incorporated
herein by reference.
(ii) Letter Agreements relating to the sale of the Songbird Apartments,
Phase I and Phase II, San Antonio, Texas, dated August 15, 1996, August 20,
1996, and August 26, 1996, previously filed as Exhibit (10)(b)(ii) to the
Registrant's Report on Form 10-Q for the quarter ended September 30, 1996, are
incorporated herein by reference.
(c)(i) Agreement of Sale and attachment thereto relating to the sale of the
Balcones Woods Apartments, Austin, Texas, previously filed as Exhibit (2) to
the Registrant's Current Report on Form 8-K dated February 11, 1997, is
incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of Balcones
Woods Apartments, Austin, Texas, is attached hereto.
(iii) Letter Agreements dated February 24, 1997 and February 26, 1997 relating
to the sale of Balcones Woods Apartments, Austin, Texas, is attached hereto.
<PAGE>
(27) Financial Data Schedule of the Registrant 1996 is attached hereto.
(b) Reports on Form 8-K:
(i) A Current Report on Form 8-K dated February 11, 1997 was filed reporting
the execution of a contract to sell the Balcones Woods Apartments, Austin,
Texas.
<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 REALTY INVESTORS LTD.-82
By: /s/Jayne A. Kosik
---------------------------
Jayne A. Kosik
Managing Director, and Chief
Financial Officer (Principal
Accounting and Financial Officer)
of Balcor Partners-XI, the General
Partner
Date: March 25,1997
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------- ------------------------------- ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Partners-XI,
/s/Thomas E. Meador the General Partner March 25,1997
- -------------------- --------------
Thomas E. Meador
Managing Director, and
Chief Financial Officer
(Principal Accounting and
Financial Officer) of
Balcor Partners-XI, the
General Partner
/s/Jayne A. Kosik March 25,1997
- -------------------- --------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1996 and 1995
Statements of Partners' Capital (Deficit), for the years ended December 31,
1996, 1995 and 1994
Statements of Income and Expenses, for the years ended December 31, 1996, 1995
and 1994
Statements of Cash Flows, for the years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1996.
Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Realty Investors Ltd.-82:
We have audited the financial statements and the financial statement schedule
of Balcor Realty Investors Ltd.-82 (An Illinois Limited Partnership) as listed
in the index of this Form 10-K. These financial statements and the
financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Realty Investors
Ltd.-82 at December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles. In addition,
in our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements, taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
As described in Note 2 to the financial statements, the Partnership Agreement
provides for the dissolution of the Partnership upon disposition of all its
interests in real estate. In March 1997, the Partnership disposed of its
remaining real estate assets. Upon resolution of the litigation described in
Note 15 to the financial statements, the Partnership intends to cease
operations and dissolve.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Chicago, Illinois
March 24, 1997
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
-------------- --------------
Cash and cash equivalents $ 4,440,715 $ 1,585,311
Restricted investments 1,230,000
Escrow deposits 320,680 790,489
Accounts and accrued interest receivable 75,524 17,823
Prepaid expenses 23,719 66,598
Deferred expenses, net of accumulated
amortization of $113,985, in 1996
and $164,686 in 1995 236,738 490,194
-------------- --------------
5,097,376 4,180,415
-------------- --------------
Investment in real estate:
Land 1,914,223 3,452,798
Buildings and improvements 9,747,109 25,174,333
-------------- --------------
11,661,332 28,627,131
Less accumulated depreciation 5,056,537 12,777,256
-------------- --------------
Investment in real estate, net of
accumulated depreciation 6,604,795 15,849,875
-------------- --------------
$ 11,702,171 $ 20,030,290
============== ==============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable $ 46,998 $ 40,387
Due to affiliates 64,953 20,633
Accrued liabilities, principally
real estate taxes 310,641 490,554
Security deposits 47,624 134,861
Mortgage notes payable 9,161,938 23,603,034
-------------- --------------
Total liabilities 9,632,154 24,289,469
-------------- --------------
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1996 and 1995
(Continued)
Commitments and contingencies
Limited Partners' capital (deficit)
(74,133 Interests issued
and outstanding) 5,699,713 (485,660)
General Partners' (deficit) (3,629,696) (3,773,519)
-------------- --------------
Total partners'capital (deficit) 2,070,017 (4,259,179)
-------------- --------------
$ 11,702,171 $ 20,030,290
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
for the years ended December 31, 1996, 1995 and 1994
Partners' Capital (Deficit) Accounts
-----------------------------------------
General Limited
Total Partner Partners
-------------- ------------ -------------
Balance at December 31, 1993 $ (8,022,095) $(3,894,154) $ (4,127,941)
Cash distributions to
Limited Partners(A) (255,758) (255,758)
Net income for the year
ended December 31, 1994 5,423,112 50,224 5,372,888
-------------- ------------ -------------
Balance at December 31, 1994 (2,854,741) (3,843,930) 989,189
Cash distributions to
Limited Partners(A) (5,408,002) (5,408,002)
Net income for the year
ended December 31, 1995 4,003,564 70,411 3,933,153
-------------- ------------ -------------
Balance at December 31, 1995 (4,259,179) (3,773,519) (485,660)
Cash distributions to
Limited Partners(A) (5,782,374) (5,782,374)
Deemed distribution (B) (286,149) (286,149)
Net income for the year
ended December 31, 1996 12,397,719 143,823 12,253,896
-------------- ------------ -------------
Balance at December 31, 1996 $ 2,070,017 $(3,629,696) $ 5,699,713
============== ============ =============
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
for the years ended December 31, 1996, 1995 and 1994
(Continued)
(A) Summary of cash distributions paid per Limited Partnership Interest:
1996 1995 1994
-------------- ------------ -------------
First Quarter $ 4.000 $ 1.725 None
Second Quarter 4.000 41.725 None
Third Quarter 24.000 3.000 $ 1.725
Fourth Quarter 46.000 26.500 1.725
(B) This amount represents a state withholding tax paid on behalf of the
Limited Partners relating to the gain on the sale of Eagles Pointe
Apartments.
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
-------------- ------------ -------------
Income:
Rental and service $ 6,037,856 $ 7,127,459 $ 7,188,617
Interest on short-term
investments 181,728 304,405 247,640
Interest on wrap-around notes
receivable 92,713 655,750
Other income 300,000
Settlement income 216,750
-------------- ------------ -------------
Total income 6,436,334 7,524,577 8,392,007
-------------- ------------ -------------
Expenses:
Interest on mortgage
notes payable 1,639,926 2,067,794 2,834,551
Depreciation 652,174 781,939 849,210
Amortization of deferred
expenses 57,528 79,338 93,449
Property operating 2,327,464 2,387,812 3,167,857
Real estate taxes 569,790 615,826 649,662
Property management fees 281,843 341,872 358,941
Administrative 411,468 490,612 538,507
-------------- ------------ -------------
Total expenses 5,940,193 6,765,193 8,492,177
-------------- ------------ -------------
Income (loss) before net
gains on sales of
properties and extra-
ordinary items 496,141 759,384 (100,170)
Gains on sales of properties 12,521,440 3,244,180 5,523,282
-------------- ------------ -------------
Income before extraordinary
items 13,017,581 4,003,564 5,423,112
Extraordinary items
Debt extinguishment expense (619,862)
-------------- ------------ -------------
Net income $ 12,397,719 $ 4,003,564 $ 5,423,112
============== ============ =============
Income before extraordinary
items allocated to General
Partner $ 150,021 $ 70,411 $ 50,224
============== ============ =============
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1996, 1995 and 1994
(Continued)
Income before extraordinary
items allocated to Limited
Partner $ 12,867,559 $ 3,933,153 $ 5,372,888
============== ============ =============
Income before extraordinary
items per Limited Partnership
Interest (74,133 issued and
outstanding) $ 173.57 $ 53.06 $ 72.48
============== ============ =============
Extraordinary items allocated
to General Partner $ (6,199) None None
============== ============ =============
Extraordinary items allocated
to Limited Partners $ (613,663) None None
============== ============ =============
Extraordinary items per Limited
Partnership Interest (74,133
issued and outstanding) $ (8.28) None None
============== ============ =============
Net income allocated to
General Partner $ 143,823 $ 70,411 $ 50,224
============== ============ =============
Net income allocated to
Limited Partners $ 12,253,896 $ 3,933,153 $ 5,372,888
============== ============ =============
Net income per Limited
Partnership Interest (74,133
issued and outstanding) $ 165.30 $ 53.06 $ 72.48
============== ============ =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
-------------- ------------ -------------
Operating activities:
Net income $ 12,397,719 $ 4,003,564 $ 5,423,112
Adjustments to reconcile net
income to net cash provided
by or used in operating
activities:
Gains on sales of
properties (12,521,440) (3,244,180) (5,523,282)
Debt extinguishment expense 195,929
Other income (300,000)
Depreciation of properties 652,174 781,939 849,210
Amortization of deferred
expenses 57,528 79,338 93,449
Net change in:
Escrow deposits 291,266 42,541 84,996
Accounts and accrued
interest receivable (57,701) 95,037 (26,409)
Prepaid expenses 42,879 (66,598)
Accounts payable 6,611 (99,842) 12,849
Due to affiliates 44,320 (77,208) 30,910
Accrued liabilities (179,913) (29,750) (258,448)
Escrow liabilities (39,877) 26,251
Security deposits (87,237) 9,593 (17,489)
-------------- ------------ -------------
Net cash provided by
operating activities 842,135 1,454,557 395,149
-------------- ------------ -------------
Investing activities:
Proceeds from repayment of
wrap-around note received
in connection with sale
of real estate 1,342,445
Proceeds from redemption of
restricted investments 1,230,000
Proceeds from sales of
real estate 14,759,501 7,897,882
Payment of selling costs (660,654) (320,159)
-------------- ------------ -------------
Net cash provided by
investing activities 15,328,847 1,342,445 7,577,723
-------------- ------------ -------------
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
(Continued)
Financing activities:
Distributions to
Limited Partners (5,782,374) (5,408,002) (255,758)
Deemed distribution (286,149)
Repayment of mortgage notes
payable (7,066,611) (5,530,000)
Repayment of mortgage note
payable - affiliate (2,323,345)
Principal payments on
mortgage notes payable (358,986) (412,448) (436,214)
Funding of capital
improvement escrows (144,034) (135,675) (129,200)
Disbursements from capital
improvement escrows 322,576 451,708 545,754
-------------- ------------ -------------
Net cash used in
financing activities (13,315,578) (5,504,417) (8,128,763)
-------------- ------------ -------------
Net change in cash and cash
equivalents 2,855,404 (2,707,415) (155,891)
Cash and cash equivalents at
beginning of year 1,585,311 4,292,726 4,448,617
-------------- ------------ -------------
Cash and cash equivalents at
end of year $ 4,440,715 $ 1,585,311 $ 4,292,726
============== ============ =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Partnership's Business:
Balcor Realty Investors Ltd.-82 is engaged principally in the operation of
residential real estate located in Austin, Texas.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold the Songbird Phase I & II
Apartments and the Eagles Pointe Apartments and during 1997, sold its remaining
property, the Balcones Woods Apartments. 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 exists or may arise. Such
contingencies may include legal and other fees stemming from litigation
involving the Partnership including, but not limited to, the lawsuit discussed
in Note 15 of Notes to the Financial Statements. In the absence of any such
contingency, the reserves will be paid within twelve months of the last
property sale. In the event a contingency arises, reserves may be held by the
Partnership for a longer period of time.
3. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) Depreciation expense is computed using straight-line and accelerated
methods. Rates used in the determination of depreciation are based upon the
following estimated useful lives:
Years
-----
Buildings and improvements 20 to 30
Furniture and fixtures 5
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account.
Interest incurred while properties are under construction is capitalized.
<PAGE>
As properties are sold, the related costs and accumulated depreciation are
removed from the respective accounts. Any gain or loss on disposition is
recognized in accordance with generally accepted accounting principles.
Deferred gains on sales of properties resulted from prior year sales being
recorded under the installment method. Gains were recognized (based on the
gross profit percentage) as future sales proceeds are collected.
(c) Effective January 1, 1995 the partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of." Under SFAS 121, the
Partnership records its investments in real estate at the lower of cost or fair
value, and periodically assesses, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimates the fair value of its properties based on the current sales price
less estimated closing costs. In the event the General Partner determines an
impairment in value has occurred, and the carrying amount of the real estate
asset will not be recovered, a provision is recorded to reduce the carrying
basis of the property to its estimated fair value. The General Partner
considers the method referred to above to result in a reasonable measurement of
a property's fair value, unless other factors affecting the property's value
indicate otherwise.
(d) Deferred expenses consist of mortgage financing fees which are amortized
over the terms of the respective agreements. Upon sale, any remaining balance
is recognized as debt extinguishment expense and classified as an extraordinary
item.
(e) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles.
(f) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Since quoted market prices are not available for the Partnership's
financial instruments, fair values have been based on estimates using present
value techniques. These techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, may not be realized in
immediate settlement of the instrument. Statement No. 107 does not apply to
all balance sheet items and excludes certain financial instruments and all
non-financial instruments such as real estate and investment in joint ventures
from its disclosure requirements.
(g) Cash and cash equivalents include all highly liquid investments with an
original maturity of three months or less when purchased. 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.
<PAGE>
(i) A reclassification has been made to the previously reported 1994 financial
statements to conform with the classification used in 1996 and 1995. This
reclassification has not changed the 1994 results.
4. Partnership Agreement:
The Partnership was organized during June 1981. The Partnership Agreement
provides for Balcor Partners-XI to be the General Partner and for the admission
of Limited Partners through the sale of up to 75,000 Limited Partnership
Interests at $1,000 per Interest, 74,133 of which were sold on or prior to
May 29, 1982, the termination date of the offering.
The Partnership Agreement generally provides that the General Partner will be
allocated 5% of the profits and losses. Profits and losses from property
dispositions will be allocated 1% to the General Partner and 99% to Limited
Partners. One hundred percent of Net Cash Receipts available for distribution
shall be distributed to the holders of Interests. In addition, there shall be
accrued for the benefit of the General Partner as its distributive share from
operations, an amount equivalent to approximately 5% of the total Net Cash
Receipts being distributed, which will be paid only out of Net Cash Proceeds.
The payment of this amount to the General Partner is subordinated to the return
to holders of Interests of their Original Capital plus a 3% per annum
Cumulative Distribution on Adjusted Original Capital, as described below.
Under certain circumstances, the General Partner may also participate in the
Net Cash Proceeds from (i) the refinancing of Partnership properties and
(ii) the sale of Partnership properties. When and as the Partnership sells or
refinances its properties, the Net Cash Proceeds resulting therefrom, which are
available for distribution, will be distributed only to holders of Interests
until such time as holders of Interests have received an amount equal to their
Original Capital plus a 3% per annum Cumulative Distribution on Adjusted
Original Capital. Thereafter, the General Partner will receive 15% of further
distributed Net Cash Proceeds. Such distribution will include the accrued
distributive share from operations. The General Partner will receive no
distribution of Net Cash Proceeds in accordance with this provision.
5. Wrap-around Note Receivable:
In February 1995, the Partnership received $1,342,445 as payment in full on the
wrap-around note that had been received in connection with the sale of the
Meridian Hills Court Apartments. This note had matured in November 1994, but
the Partnership granted the borrower an extension. The amount received
represented the wrap-around note balance of $6,150,000, less the underlying
mortgage note balance, which was $4,807,555 at the time of the repayment. The
liability for the underlying mortgage note was assumed by the purchaser of the
property. As a result of this repayment, the Partnership recognized the
remaining deferred gain of $3,244,180 from the property sale in its 1995
financial statements. The Partnership had recognized interest income related to
this wrap-around note during 1995 and 1994.
<PAGE>
6. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1996 and 1995 consisted of the
following:
<TABLE> Carrying Carrying Current Final
Amount of Amount of Inter- Matur- Current Estimated
Property Pledged Notes at Notes at est ity Monthly Balloon
as Collateral 12/31/96 12/31/95 Rate Date Payment Payment
- ----------------- ---------- ---------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Apartment Complexes:
Balcones Woods (C) $9,161,938 $9,319,103 7.625% 2003 $71,726 $7,701,000
Eagles Pointe (A) None 4,408,130
None 2,781,372
Songbird Phases I&II (B) None 7,094,429
---------- ----------
Total $9,161,938 $23,603,034
=========== ===========
</TABLE>
See notes (A) through (C) following.
<PAGE>
(A) This property was sold in October 1996. See Note 11 of Notes to the
Financial Statements for additional information.
(B) This property was sold in September 1996. See Note 11 of Notes to the
Financial Statements for additional information.
(C) This property was sold in March 1997. The Partnership was making monthly
payments of principal and interest prior to the sale of this property. See Note
16 of Notes to the Financial Statements for additional information.
Real estate with a carrying value of $6,604,795 at December 31, 1996 was
pledged as collateral for repayment of the mortgage loan.
The Partnership incurred and paid interest expense on non-affiliated mortgage
notes payable of $1,655,049, $2,067,794 and $2,792,114 during 1996, 1995 and
1994, respectively.
7. Management Agreement:
As of December 31, 1996, the property owned by the Partnership is under a
management agreement with a third-party management company. This management
agreement provides for annual fees of 5% of gross operating receipts.
8. Seller's Participation in Joint Venture:
The Balcones Woods Apartments is owned by a joint venture between the
Partnership and the original seller. The property's seller retains an interest
in the property through its interest in the joint venture. All assets,
liabilities, income and expenses of the joint venture are included in the
financial statements of the Partnership with the appropriate adjustment, if
any, for the seller's participation in the joint venture.
9. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, will differ from the
tax returns due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net income for 1996 in the financial statements is $6,299,705 less than the
tax income of the Partnership for the same period. The decrease in net income
for financial statement purposes is primarily from the difference in
accumulated depreciation due to the application of different methods for
generally accepted accounting principals and tax. Accumulated depreciation is a
component of the calculation of the gain on sale.
<PAGE>
10. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
----------------- ----------------- -----------------
Paid Payable Paid Payable Paid Payable
------ --------- ------ --------- ------ ---------
Property manage-
ment fees None None None None $336,869 None
Reimbursement of
expenses to
General Partner,
at cost:
Accounting $14,097 $11,335 $48,142 $4,054 66,482 $25,801
Data processing 2,154 1,732 23,877 1,627 44,605 10,907
Investor com-
munications None None 6,608 None 20,355 5,898
Legal 11,454 9,210 21,721 2,539 10,594 8,392
Portfolio
management 47,960 38,564 109,487 12,306 65,643 39,974
Other 5,114 4,112 8,284 107 12,668 6,869
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program; however, the General Partner is reimbursed
for program expenses. The Partnership paid premiums to the deductible insurance
program of $8,062, $52,047, and $66,189 in 1996, 1995, and 1994, respectively.
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed all
of the Partnership's properties until the affiliate was sold to a third party
in November 1994.
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., an affiliate of the General
Partner. The Partnership incurred interest expense of $42,437 and paid interest
expense of $72,120 on this loan during 1994.
The Partnership was required to post a $1,230,000 letter of credit as
additional collateral for the Eagles Pointe Apartments mortgage note payable.
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 was invested in
short-term instruments pursuant to the terms of the pledge agreement with the
lending institution. Interest earned on this amount accumulated for the benefit
of the Partnership. The Partnership obtained a release of the funds in July
1996, upon meeting certain criteria pursuant to the terms of the loan
agreement.
<PAGE>
11. Property Sales:
(a) In October 1996, the Partnership sold the Eagles Pointe Apartments
in an all cash sale for $11,075,000. From the proceeds of the sale,
the Partnership paid $7,066,611 to the third party mortgage holder in full
satisfaction of the first and second mortgage loans, and paid $298,233 in
selling costs and $423,933 of prepayment penalties. In addition, the
Partnership paid a state withholding tax of $286,149 on behalf of the Limited
Partners relating to the gain on the sale of the property which has been
recorded as a deemed distribution for financial statement purposes. The basis
of the property was $3,938,156, which is net of accumulated depreciation of
$4,161,190. For financial statement purposes, the Partnership recognized a gain
of $6,838,611 from the sale of this property.
(b) In September 1996, the Partnership sold the Songbird Phase I&II Apartments
in an all cash sale for $10,700,000. The purchaser of the Songbird Apartments
took title subject to the existing first mortgage loan in the amount of
$7,015,499. From the proceeds of the sale, the Partnership paid $362,421 in
selling costs. The basis of the property was $4,654,750, which is net of
accumulated depreciation of $4,211,703. For financial statement purposes, the
Partnership recognized a gain of $5,682,829 from the sale of this property.
(c) In May 1994, the Partnership sold the Via El Camino Apartments for
$7,150,000. From the proceeds of the sale, the Partnership paid $5,530,000 in
full satisfaction of the property's first mortgage loan. From the proceeds of
the sale, the Partnership paid $160,884 in selling costs. 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.
(d) In February 1994, the Partnership sold the Bemis Square Shopping Center,
including a leasehold interest in a portion of the land, for $4,350,000. The
purchaser assumed the existing first mortgage loan of $3,602,118. From the
proceeds of the sale, the Partnership paid $159,275 in selling costs. 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.
12. Extraordinary Items:
(a) In September 1996, the Partnership sold the Songbird Phase I&II Apartments.
In connection with the sale, the Partnership wrote off the remaining
unamortized deferred financing fees in the amount of $192,960. This amount was
recognized as an extraordinary item and classified as a debt extinguishment
expense.
(b) In October 1996, the Partnership sold the Eagles Pointe Apartments. In
connection with the sale, the Partnership paid $423,933 of prepayment penalties
and wrote off the remaining unamortized deferred financing fees in the amount
of $2,969. These amounts were recognized as extraordinary items and classified
as debt extinguishment expense.
<PAGE>
13. Settlement Income:
In February 1996, the Partnership reached a settlement with the original seller
regarding the purchase of the Balcones Woods Apartments. In connection with
this settlement, the Partnership received $216,750 representing amounts due
from the seller under the management and guarantee agreement as well as
construction defects at the property.
14. Fair Value of Financial Instruments:
The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1996 and 1995 are as follows:
The carrying value of cash and cash equivalents, accounts and accrued interest
receivable, accounts payable and restricted investments approximate fair value.
Based on borrowing rates available to the Partnership at the end of 1996 and
1995 for mortgage loans with similar terms and maturities, the fair value of
the mortgage note payable approximates the carrying value.
15. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership and
certain affiliates have been named as defendants alleging certain federal
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning, as well as the 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 yet been certified, and no determination of the merits have been made. It
is not determinable at this time whether or not an unfavorable decision in this
action would have a material adverse impact on the Partnership's financial
position, results of operations or liquidity. The Partnership believes it has
meritorious defenses to contest the claims.
16. Subsequent Events:
(a) In January 1997, the Partnership made a distribution of $4,003,182 ($54.00
per Interest) to the holders of Limited Partnership Interests representing a
quarterly distribution of Net Cash Receipts of $4.00 per Interest for the
fourth quarter of 1996 and a special distribution of $50.00 per Interest from
Net Cash Proceeds primarily from the sale of Eagles Pointe Apartments.
(b) In March 1997, the Partnership sold the Balcones Woods Apartments for
$15,800,000. The purchaser of the Balcones Woods Apartments took title subject
to the existing first mortgage loan in the amount of $9,113,278. From the
proceeds of the sale, the Partnership paid $369,746 in selling costs. For
financial statement purposes, the Partnership will recognize a gain of
approximately $8,888,000 from the sale of this property during the first
quarter 1997.
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1996
<CAPTION>
Col. A Col. B Col. C
Col. D
- --------------------- -------- -------------------- ---------------------------------
Initial Cost Cost Adjustments
to Partnership Subsequent to Acquisition
-------------------- ---------------------------------
Buildings Carrying
Encum- and Im- Improve- Costs
Description brances Land provements Land ments (a)
- --------------------- ------- -------- ------------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balcones Woods Apts.,
384-units, Austin, TX (d) $1,542,435 $ 7,546,641 $(28,797) $240,505 $2,360,548
---------- ----------- -------- -------- ----------
Total $1,542,435 $7,546,641 $(28,797) $240,505 $2,360,548
========== =========== ======== ======== ========
</TABLE>
See notes (a) through (e) following.
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION as of December 31, 1996
(Continued)
<CAPTION>
Col. A Col. E Col. F Col. G Col. H Col. I
- ------------------- -------------------------------- -------- -------- ------ --------------
Gross Amounts at Which Life Upon
Carried at Close of Period Which Depre-
------------------------------- ciation in
Buildings Accumulated Date Date Latest Income
and Im- Total Deprecia- of Con- Acq- Statement
Description Land provements (b)(c) tion(c) struction uired is Computed
------------------- -------- ---------- ---------- --------- --------- ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balcones Woods Apts.,
384-units, Austin, TX $1,914,223 $ 9,747,109 $11,661,332 $5,056,537 1983 9/81 (e)
---------- ----------- ----------- -----------
Total $1,914,223 $9,747,109 $11,661,332 $5,056,537
========== =========== =========== ===========
</TABLE>
See notes (a) through (e) following.
<PAGE>
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
NOTES TO SCHEDULE III
(a) Consists of legal fees, appraisal fees, title costs, other related
professional fees and capitalized construction period interest.
(b) The aggregate cost of land for Federal income tax purposes is $1,513,638
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $7,986,802. The total of these is $9,500,440.
(c) Reconciliation of Real Estate
-----------------------------
1996 1995 1994
---------- ---------- ----------
Balance at beginning of year $28,627,131 $28,627,131 $38,399,133
Deductions during year:
Cost of real estate sold (16,965,799) (9,772,002)
----------- ----------- -----------
Balance at end of year $11,661,332 $28,627,131 $28,627,131
=========== =========== ===========
Reconciliation of Accumulated Depreciation
- ------------------------------------------
1996 1995 1994
----------- ---------- -----------
Balance at beginning of year $12,777,256 $11,995,317 $15,261,550
Depreciation expense for
the year 652,174 781,939 849,210
Accumulated depreciation of
real estate sold (8,372,893) (4,115,443)
----------- ------------ ------------
Balance at end of year $5,056,537 $12,777,256 $11,995,317
=========== ============ ============
(d) See description of mortgage notes payable in Note 6 of Notes to the
Financial Statements.
(e) Depreciation expense is computed based upon the following estimated useful
lives:
Years
-----
Buildings and improvements 20 to 30
Furniture and fixtures 5
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF SALE
THIS FIRST AMENDMENT TO AGREEMENT OF SALE (this "Amendment") is made and
entered into to be effective as of the 21st day of February, 1997, by and
between MID-AMERICA APARTMENTS OF TEXAS, L.P., a Texas limited partnership
("Purchaser"), and BW ASSOCIATES, LTD., an Illinois limited partnership
("Seller").
W I T N E S S E T H:
WHEREAS, Seller and Purchaser are parties to that certain Agreement of
Sale entered into as of February 11, 1997 (the "Original Agreement"), pursuant
to which Seller agreed to sell to Purchaser, and Purchaser agreed to purchase
from Seller, the "Property" (as defined in the Original Agreement); and
WHEREAS, Seller and Purchaser now desire to amend the Original Agreement
and the Escrow Agreement pursuant to the terms and provisions set forth herein.
NOW, THEREFORE, for and in consideration of the premises and mutual
agreements contained herein, the payment of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller and Purchaser agree that the Original Agreement is
amended as follows:
1. All capitalized terms used in this Amendment, to the extent not
otherwise expressly defined herein, shall have the same meanings ascribed to
such terms in the Original Agreement.
2. On February 5, 1997, Purchaser delivered its Title Notice to Seller
pursuant to Section 3.B. of the Original Agreement. The Title Notice raised
the density requirement contained in restrictions recorded in Volume 6568, Page
2105 of the Deed Records of Travis County, Texas as a Disapproved Title
Exception. Seller elected to not give a Response Notice. Notwithstanding
anything contained in Section 3.B. of the Original Agreement to the contrary,
Purchaser shall have until February 28, 1997 to waive in writing its objection
to such Disapproved Title Exception and elect to proceed towards Closing. If
Purchaser does not so elect on or before February 28, 1997, the Original
Agreement shall be terminated in accordance with Section 3.B.
3. Except as amended herein, the terms and conditions of the Original
Agreement shall continue in full force and effect and are hereby ratified in
their entirety.
4. This Amendment may be executed in multiple counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed to be effective as of the
date first set forth above.
PURCHASER:
MID-AMERICA APARTMENTS OF TEXAS, L.P.,
a Texas limited partnership
By: MAC of Delaware, Inc., a Delaware
corporation, its general partner
By: /s/ John J. Byrne, III
------------------------------------
John J. Byrne, III, President
SELLER:
BW ASSOCIATES, LTD., an Illinois
limited partnership
By: Balcones Associates, Ltd., an Illinois
limited partnership, its general partner
By: BW of Illinois, Inc., an Illinois
corporation, its general partner
By: /s/ John K. Powell, Jr.
----------------------------------
Name: John K. Powell, Jr.
----------------------------------
Its: Senior Vice President
----------------------------------
<PAGE>
LAW OFFICES
APPERSON, CRUMP, DUZANE & MAXWELL, PLC
1755 KIRBY PARKWAY, SUITE 100
MEMPHIS, TENNESSEE 38120-4376
901/756-6300
FACSIMILE 901/757-1296
FEBRUARY 24, 1997
BW Associates, Ltd. VIA FEDERAL EXPRESS
c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road, Suite A200
Bannockburn, IL 60015
Attention: Ilona Adams
Re: Agreement of Sale dated February 11, 1997 by and between
Mid-America Apartments of Texas, L.P. and BW Associates,
Ltd. (the Contract)
Dear Ms. Adams:
In accordance with the provisions of Section 27 of the Contract, this is
to provide notice that the Purchaser hereby extends the Closing date for 30
days because of the inability to obtain the Lender consent. The new Closing
Date will be April 2, 1997.
Yours very truly,
/s/ John Maxwell
John B. Maxwell, Jr.
JBM/sh
cc: The Balcor Company
Mr. Daniel J. Perlman
Mr. Don Aldridge
<PAGE>
LAW OFFICES
APPERSON, CRUMP, DUZANE & MAXWELL, PLC
1755 KIRBY PARKWAY, SUITE 100
MEMPHIS, TENNESSEE 38120-4376
901/756-6300
FACSIMILE 901/757-1296
FEBRUARY 26, 1997
BW Associates, Ltd. VIA FEDERAL EXPRESS
c/o The Balcor Company
Bannockburn Lake Office Plaza
355 Waukegan Road, Suite A200
Bannockburn, IL 60015
Attention: Ilona Adams
Dear Ms. Adams:
In accordance with paragraph 3.B of the Agreement of Sale between BW
Associates, Ltd. as Seller and Mid-America Apartments of Texas, L.P. as
Purchaser, for that property commonly known as Balcones Woods Apartments
located in Austin, Texas, Purchaser hereby waives its objection to the
Disapproved Title Exception, written notice of which was given on February 5,
1997. Accordingly, Purchaser elects to proceed toward closing in accordance
with the Agreement, and as per John Maxwell's letter of February 24, 1997
extending the Closing Date.
Sincerely,
/s/ Jane P. Long
Jane P. Long
JPL/sh
cc: The Balcor Company, Attention: James Mendelson
Mr. Daniel J. Perlman
Charter Title Company, Attention: Frances A. Chetta
Mr. Don Aldridge
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 4441
<SECURITIES> 0
<RECEIVABLES> 76
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4861
<PP&E> 11661
<DEPRECIATION> 5057
<TOTAL-ASSETS> 11702
<CURRENT-LIABILITIES> 470
<BONDS> 9162
0
0
<COMMON> 0
<OTHER-SE> 2070
<TOTAL-LIABILITY-AND-EQUITY> 11702
<SALES> 0
<TOTAL-REVENUES> 18958
<CGS> 0
<TOTAL-COSTS> 3179
<OTHER-EXPENSES> 1121
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1640
<INCOME-PRETAX> 13018
<INCOME-TAX> 0
<INCOME-CONTINUING> 13018
<DISCONTINUED> 0
<EXTRAORDINARY> 620
<CHANGES> 0
<NET-INCOME> 12398
<EPS-PRIMARY> 165.30
<EPS-DILUTED> 165.30
</TABLE>
