UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(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, Illinois 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 ]
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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,
investors 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.
Certain statements in this Form 10-K constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements may include projections of revenues, income or losses, capital
expenditures, plans for future operations, financing plans or requirements, and
plans relating to the property of the Partnership, as well as assumptions
relating to the foregoing.
The forward-looking statements made by the Partnership are subject to known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to differ materially
from any future results, performance or achievements expressed or implied by
the forward-looking statements.
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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
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Jayne A. Kosik
Managing Director, and Chief
Financial Officer (Principal
Accounting and Financial Officer)
of Balcor Partners-XI, the General
Partner
Date: April 4, 1997
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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
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President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Partners-XI,
/s/ Thomas E. Meador the General Partner April 4, 1997
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Thomas E. Meador
Managing Director, and
Chief Financial Officer
(Principal Accounting and
Financial Officer) of Balcor
/s/ Jayne A. Kosik Partners-XI, the General Partner April 4, 1997
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Jayne A. Kosik
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