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, 1997
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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 has
retained cash reserves from the sale of its real estate investments for
contingencies which exist or may arise. The Registrant's operations
currently consist of interest income earned on short-term investments and the
payment of administrative expenses.
The Registrant utilized the net offering proceeds to acquire fourteen real
property investments and has since disposed of all of these investments. The
Partnership Agreement provides that the proceeds of any sale or refinancing
of the Registrant's properties will not be reinvested in new acquisitions.
The Partnership Agreement provides for the dissolution of the Registrant upon
the occurrence of certain events, including the disposition of all interests
in real estate. During 1996, the Registrant sold two properties. During 1997,
the Registrant sold its remaining property, the Balcones Woods Apartments.
The Registrant has retained a portion of the cash from the property sales to
satisfy the obligations of the Registrant as well as establish a reserve for
contingencies. The timing of the termination of the Registrant and final
distribution of cash will depend upon the nature and extent of liabilities
and contingencies which exist or may arise. Such contingencies may include
legal and other fees and costs stemming from litigation involving the
Registrant including, but not limited to, the lawsuit discussed in "Item 3.
Legal Proceedings." In the absence of any such contingencies, the reserves
will be paid within twelve months of the last property being sold. In the
event a contingency continues to exist or arises, reserves may be held by the
Partnership for a longer period of time.
During March 1997, the Registrant sold the Balcones Woods Apartments for
$15,800,000. See "Item 7. Liquidity and Capital Resources" for additional
information.
The Registrant no longer has an ownership interest in any real estate
investment. The General Partner is not aware of any material potential
liability relating to environmental issues or conditions affecting real
estate formerly owned by the Registrant.
The officers and employees of 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.
Item 2. Properties
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As of December 31, 1997, the Registrant did not own any properties.
In the opinion of the General Partner, the Registrant has obtained adequate
insurance coverage.
<PAGE>
See Notes to Financial Statements for other information regarding former real
estate property investments.
Item 3. Legal Proceedings
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Klein, et al. vs. Lehman Brothers, Inc., et al.
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On August 30, 1996, a proposed class action complaint was filed, Lenore
Klein, et al. vs. Lehman Brothers, Inc., et al. (Superior Court of New
Jersey, Law Division, Union County, Docket No. Unn-L-5162-96). The complaint
was amended on each of October 18, 1996, December 5, 1997 and January 15,
1998. The Registrant, additional limited partnerships which were sponsored by
The Balcor Company (together with the Registrant, the "Affiliated
Partnerships"), The Balcor Company, American Express Company, Lehman
Brothers, Inc., Smith Barney, Inc., American Express Financial Advisors, and
other affiliated entities and various individuals are named defendants in the
action. The most recent amended complaint, plaintiffs' Third 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
Affiliated Partnerships, the marketing of interests in the Affiliated
Partnerships and the acquisition of real properties for the Affiliated
Partnerships. The Third Amended Complaint seeks judgment for compensatory
damages equal to the amount invested in the Affiliated 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 Affiliated 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 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 1997.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
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Matters
- -------
There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding distributions, see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital
Resources."
As of December 31, 1997, the number of record holders of Limited Partnership
Interests of the Registrant was 6,762.
Item 6. Selected Financial Data
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Year ended December 31,
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1997 1996 1995 1994 1993
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Total income $796,322 $6,436,334 $7,524,577 $8,392,007 $9,010,969
(Loss) income before
net gains on sales
of assets and
extraordinary items (72,860) 496,141 759,384 (100,170) (950,479)
Net income 8,585,582 12,397,719 4,003,564 5,423,112 3,749,327
Net income
per Limited Part-
nership Interest-
Basic and Diluted 68.37 165.30 53.06 72.48 50.58
Total assets 2,057,530 11,702,171 20,030,290 26,891,815 34,122,065
Mortgage notes
payable None 9,161,938 23,603,034 28,823,037 40,714,714
Cash distributions
per Limited Part-
nership Interest (A) 116.50 78.00 72.95 3.45 None
(A) This amount includes distributions of original capital of $112.50, $63.00
and $63.50 per Limited Partnership Interest during the years 1997, 1996 and
1995, respectively.
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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<PAGE>
Balcor Realty Investors Ltd.-82 (the "Partnership") recognized gains on sales
of properties during each of 1997, 1996 and 1995. These gains resulted in a
decrease in net income in 1997 as compared to 1996 and an increase in net
income in 1996 as compared to 1995. Further discussion of the Partnership's
operations is summarized below.
1997 Compared to 1996
- ---------------------
Rental and service income, interest expense on mortgage notes payable,
depreciation expense, amortization of deferred expenses, property operating
expense, real estate tax expense and property management fees decreased in
1997 as compared to 1996 due to the sales of the Songbird-Phases I & II,
Eagles Pointe and Balcones Woods apartment complexes in September 1996,
October 1996, and March 1997, respectively. During 1997 and 1996, the
Partnership recognized gains in connection with these sales of $8,887,873 and
$12,521,440, respectively.
Higher average cash balances were available for investment in 1996 due to the
proceeds received in connection with the 1996 property sales prior to
distribution to Limited Partners. This resulted in a decrease in interest
income on short-term investments during 1997 as compared to 1996.
The Partnership recognized other income during 1997 in connection with
refunds of prior years' insurance premiums relating to the Partnership's
properties.
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
received from the seller under the management and guarantee agreement as well
as construction defects at the property.
The Partnership incurred legal, printing and postage and investor processing
costs in connection with responses to tender offers during 1996. In addition,
portfolio management and accounting fees decreased during 1997 due to the
sales of the Partnership's properties. As a result, administrative expenses
decreased in 1997 as compared to 1996.
During 1997, the Partnership wrote-off the remaining unamortized deferred
expenses in connection with the sale of the Balcones Woods Apartments of
$229,431. During 1996, the Partnership wrote-off the remaining unamortized
deferred expenses in connection with the sales of the Songbird-Phases I & II
and the Eagles Pointe apartment complexes of $192,960 and $2,969,
respectively. In addition, the Partnership paid $423,933 in prepayment
penalties in connection with the sale of the Eagles Pointe Apartments. These
amounts were recognized as extraordinary items and classified as debt
extinguishment expense for financial statement purposes.
1996 Compared to 1995
- ---------------------
Rental and service income, depreciation expense, amortization of deferred
expenses and property management fees decreased in 1996 as compared to 1995
due to the sales of the Songbird-Phases I & II and the Eagles Pointe
apartment complexes in September and October 1996, respectively.
<PAGE>
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.
Interest expense decreased in 1996 as compared to 1995 due to the sales of
the Songbird-Phases I & II and the Eagles Pointe apartment complexes during
1996 and the repayment of the Meridian Hills Court Apartments wrap-around
note during 1995.
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 apartment complexes.
Real estate tax expense decreased in 1996 as compared to 1995 due to the
sales of the Songbird-Phases I & II and the Eagles Pointe apartment complexes
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.
The Partnership incurred legal, consulting, printing and postage costs in
connection with responses to tender offers during 1995 and 1996. As a result
of higher fees incurred by the Partnership in 1995, administrative expenses
decreased during 1996 as compared to 1995.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $2,398,000 as
of December 31, 1997 when compared to December 31, 1996 primarily due to the
payment of distributions to Limited Partners in 1997, which was partially
offset by net proceeds received in connection with the sale of the Balcones
Woods Apartments in 1997. Cash of approximately $105,000 was used in
operating activities to pay administrative expenses which was partially
offset by cash generated from property operations and interest income on
short-term investments. Cash provided by investing activities of
approximately $6,317,000 consisted of net proceeds received from the sale of
the Balcones Woods Apartments. Cash used in financing activities of
approximately $8,610,000 consisted of distributions of $8,636,000 to the
Limited Partners and principal payments on mortgage notes payable offset
by net disbursements received from capital improvement escrows. In January
1998, the Partnership made a distribution of $495,747 to Limited Partners
representing a distribution of remaining available Net Cash Proceeds, as
discussed below.
The Partnership Agreement provides for the dissolution of the Partnership
upon the occurrence of certain events, including the disposition of all
<PAGE>
interests in real estate. During 1996, the Partnership sold two properties.
During 1997, the Partnership sold its remaining property, the Balcones Woods
Apartments. The Partnership has retained a portion of the cash from property
sales to satisfy obligations of the Partnership as well as establish a
reserve for contingencies. The timing of the termination of the Partnership
and final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. Such contingencies
may include legal and other fees and costs stemming from litigation involving
the Partnership including, but not limited to, the lawsuit discussed in "Item
3. Legal Proceedings". In the absence of any such contingencies, the reserves
will be paid within twelve months of the last property being sold. In the
event a contingency continues to exist or arises, reserves may be held by the
Partnership for a longer period of time.
In March 1997, the Partnership sold the Balcones Woods Apartments for
$15,800,000. The purchaser of the property 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. Pursuant to the terms
of the sale, $200,000 of the proceeds was retained by the Partnership and was
unavailable for distribution until May 1997, at which time the funds were
released in full. The available proceeds were distributed to the Limited
Partners in April and July 1997. See Note 11 of Notes to Financial Statements
for additional information.
Pursuant to the sale agreement for the Songbird - Phases I & II Apartments,
$500,000 of the sale proceeds was retained by the Partnership and was
unavailable for distribution until January 1997, at which time the funds were
released in full.
The Partnership made distributions totaling $116.50, $78.00, and $72.95 per
Interest in 1997, 1996, and 1995, respectively. See Statement of Partner's
Capital for additional information. Distributions were comprised of $4.00 of
Net Cash Receipts and $112.50 of Net Cash Proceeds in 1997, $15.00 of Net
Cash Receipts and $63.00 of Net Cash Proceeds in 1996, and $9.45 of Net Cash
Receipts and $63.50 of Net Cash Proceeds in 1995.
In January 1998, the Partnership made a distribution of $495,747 ($6.69 per
Interest) to the holders of Limited Partnership Interests representing a
distribution of remaining available Net Cash Proceeds. Including the January
1998 distribution, Limited Partners have received distributions of Net Cash
Receipts of $46.90 and Net Cash Proceeds of $555.69, totaling $602.59 per
$1,000 Interest, as well as certain tax benefits. No additional
distributions are anticipated to be made prior to the termination of the
Partnership. However, after paying final partnership expenses, any remaining
cash reserves will be distributed. Limited Partners will not recover all of
their original investment.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation
S-K is not applicable.
<PAGE>
The net effect of the differences between the financial statements and the
tax returns is summarized as follows:
December 31, 1997 December 31, 1996
------------------------ ------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
----------- ----------- ----------- -----------
Total assets $2,057,530 $10,347,466 $11,702,171 $15,614,574
Partners' capital
(deficit):
General Partner (112,239) (112,239) (3,629,696) (1,814,903)
Limited Partners 2,131,343 10,430,582 5,699,713 7,797,325
Net income:
General Partner 3,517,457 1,702,664 143,823 3,370,669
Limited Partners 5,068,125 11,269,752 12,253,896 15,326,755
Per Limited
Partnership
Interest 68.37(A) 152.02 165.30(A) 206.75
(A) Amount represents basic and diluted net income per Limited Partnership
Interest.
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
Executive Officer Thomas E. Meador
Senior Vice President Alexander J. Darragh
Senior Vice President John K. Powell, Jr.
Senior Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 50) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a member of the board of directors of
The Balcor Company. He is also 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 43) joined Balcor in September 1988 and is
responsible for real estate advisory services for Balcor and American Express
Company. Mr. Darragh received masters' degrees in Urban Geography from Queen's
University and in Urban Planning from Northwestern University.
John K. Powell Jr. (age 47) 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. He is a member of the board of directors of The Balcor Company. 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 40) 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 Senior Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.
<PAGE>
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1997.
Item 11. Executive Compensation
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The Registrant paid $2,336 in 1997 with 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 6,436.64 8.68%
Partnership Partners Limited
Interests Chicago, Partnership
Illinois Interests
Limited Metropolitan 3,248.34 4.38%
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 13.06% of the
Interests.
(b) Neither Balcor Partners-XI nor its officers or partners own any Limited
Partnership Interests of the Registrant.
Relatives of the officers and affiliates of the General Partner own 25 Limited
Partnership Interests.
<PAGE>
(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
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(a)
(1 & 2) See Index to Financial Statements 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, previously filed as Exhibit (10)(c)(ii) to the
Registrant's Report on Form 10-K for the year ended December 31, 1996, is
incorporated herein by reference.
(iii) Letter Agreements dated February 24, 1997 and February 26, 1997 relating
<PAGE>
to the sale of Balcones Woods Apartments, Austin, Texas, previously filed as
Exhibit (10)(c)(iii) to the Registrant's Report on Form 10-K for the year ended
December 31, 1996, is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant 1997 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1997.
(c) Exhibits: See item 14(a)(3) above.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALCOR REALTY INVESTORS LTD.-82
By: Jayne A. Kosik
---------------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal
Accounting Officer)
of Balcor Partners-XI, the General
Partner
Date:
------------------
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,
Thomas E. Meador the General Partner
- -------------------- --------------
Thomas E. Meador
Senior Managing Director and
Chief Financial Officer
(Principal Accounting Officer)
of Balcor Partners-XI, the
General Partner
Jayne A. Kosik
- -------------------- --------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1997 and 1996
Statements of Partners' Capital (Deficit), for the years ended December 31,
1997, 1996 and 1995
Statements of Income and Expenses, for the years ended December 31, 1997, 1996
and 1995
Statements of Cash Flows, for the years ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Realty Investors Ltd.-82:
We have audited the financial statements of Balcor Realty Investors Ltd.-82 (An
Illinois Limited Partnership) as listed in the Index of this Form 10-K. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits 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, 1997 and 1996, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
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. As of December 31, 1997, the Partnership has
disposed of all 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.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 16, 1998
<PAGE>
BALCOR REALTY INVESTORS LTD.- 82
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1997 1996
-------------- --------------
Cash and cash equivalents $ 2,042,608 $ 4,440,715
Escrow deposits 320,680
Accounts and accrued interest receivable 14,922 75,524
Prepaid expenses 23,719
Deferred expenses, net of accumulated
amortization of $113,985 in 1996 236,738
-------------- --------------
2,057,530 5,097,376
-------------- --------------
Investment in real estate:
Land 1,914,223
Buildings and improvements 9,747,109
--------------
11,661,332
Less accumulated depreciation 5,056,537
--------------
Investment in real estate, net of
accumulated depreciation 6,604,795
-------------- --------------
$ 2,057,530 $ 11,702,171
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 12,680 $ 46,998
Due to affiliates 25,746 64,953
Accrued liabilities, principally
real estate taxes 310,641
Security deposits 47,624
Mortgage note payable 9,161,938
-------------- --------------
Total liabilities 38,426 9,632,154
-------------- --------------
Commitments and contingencies
Limited Partners' capital
(74,133 Interests issued
and outstanding) 2,131,343 5,699,713
General Partners' deficit (112,239) (3,629,696)
-------------- --------------
Total partners'capital 2,019,104 2,070,017
-------------- --------------
$ 2,057,530 $ 11,702,171
============== ==============
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, 1997, 1996 and 1995
Partners' Capital (Deficit) Accounts
------------------------------------------
General Limited
Total Partner Partners
-------------- ------------- -------------
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
Cash distributions to
Limited Partners(A) (8,636,495) (8,636,495)
Net income for the year
ended December 31, 1997 8,585,582 3,517,457 5,068,125
-------------- ------------- -------------
Balance at December 31, 1997 $ 2,019,104 $ (112,239) $ 2,131,343
============== ============= =============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1997 1996 1995
-------------- ------------- -------------
First Quarter $ 54.000 $ 4.000 $ 1.725
Second Quarter 55.000 4.000 41.725
Third Quarter 7.500 24.000 3.000
Fourth Quarter None 46.000 26.500
(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, 1997, 1996 and 1995
1997 1996 1995
-------------- ------------- -------------
Income:
Rental and service $ 644,285 $ 6,037,856 $ 7,127,459
Interest on short-term
investments 133,138 181,728 304,405
Interest on wrap-around note
receivable 92,713
Other income 18,899
Settlement income 216,750
-------------- ------------- -------------
Total income 796,322 6,436,334 7,524,577
-------------- ------------- -------------
Expenses:
Interest on mortgage
notes payable 126,547 1,639,926 2,067,794
Depreciation 62,414 652,174 781,939
Amortization of deferred
expenses 7,307 57,528 79,338
Property operating 360,943 2,327,464 2,387,812
Real estate taxes 64,727 569,790 615,826
Property management fees 32,133 281,843 341,872
Administrative 215,111 411,468 490,612
-------------- ------------- -------------
Total expenses 869,182 5,940,193 6,765,193
-------------- ------------- -------------
(Loss) income before
gains on sales of
properties and extra-
ordinary items (72,860) 496,141 759,384
Gains on sales of properties 8,887,873 12,521,440 3,244,180
-------------- ------------- -------------
Income before extraordinary
items 8,815,013 13,017,581 4,003,564
Extraordinary items:
Debt extinguishment expense (229,431) (619,862)
-------------- ------------- -------------
Net income $ 8,585,582 $ 12,397,719 $ 4,003,564
============== ============= =============
Income before extraordinary
items allocated to General
Partner $ 3,611,453 $ 150,021 $ 70,411
============== ============= =============
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, 1997, 1996 and 1995
(Continued)
Income before extraordinary
items allocated to Limited
Partners $ 5,203,560 $ 12,867,560 $ 3,933,153
============== ============= =============
Income before extraordinary
items per Limited Partnership
Interest (74,133 issued and
outstanding)-Basic and Diluted $ 70.20 $ 173.58 $ 53.06
============== ============= =============
Extraordinary items allocated
to General Partner $ (93,996) $ (6,199) None
============== ============= =============
Extraordinary items allocated
to Limited Partners $ (135,435) $ (613,663) None
============== ============= =============
Extraordinary items per Limited
Partnership Interest (74,133
issued and outstanding)-
Basic and Diluted $ (1.83) $ (8.28) None
============== ============= =============
Net income allocated to
General Partner $ 3,517,457 $ 143,822 $ 70,411
============== ============= =============
Net income allocated to
Limited Partners $ 5,068,125 $ 12,253,897 $ 3,933,153
============== ============= =============
Net income per Limited
Partnership Interest (74,133
issued and outstanding)-
Basic and Diluted $ 68.37 $ 165.30 $ 53.06
============== ============= =============
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, 1997, 1996 and 1995
1997 1996 1995
-------------- ------------- -------------
Operating activities:
Net income $ 8,585,582 $ 12,397,719 $ 4,003,564
Adjustments to reconcile net
income to net cash (used in)
or provided by operating
activities:
Gains on sales of
properties (8,887,873) (12,521,440) (3,244,180)
Debt extinguishment expense 229,431 195,929
Depreciation of properties 62,414 652,174 781,939
Amortization of deferred
expenses 7,307 57,528 79,338
Net change in:
Escrow deposits 245,881 291,266 42,541
Accounts and accrued
interest receivable 60,602 (57,701) 95,037
Prepaid expenses 23,719 42,879 (66,598)
Accounts payable (34,318) 6,611 (99,842)
Due to affiliates (39,207) 44,320 (77,208)
Accrued liabilities (310,641) (179,913) (29,750)
Escrow liabilities (39,877)
Security deposits (47,624) (87,237) 9,593
-------------- ------------- -------------
Net cash (used in) or provided
by operating activities (104,727) 842,135 1,454,557
-------------- ------------- -------------
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 investment 1,230,000
Proceeds from sale of
real estate 6,686,722 14,759,501
Payment of selling costs (369,746) (660,654)
-------------- ------------- -------------
Net cash provided by
investing activities 6,316,976 15,328,847 1,342,445
-------------- ------------- -------------
Financing activities:
Distributions to
Limited Partners (8,636,495) (5,782,374) (5,408,002)
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, 1997, 1996 and 1995
(Continued)
Deemed distribution (286,149)
Repayment of mortgage note
payable (7,066,611)
Principal payments on
mortgage notes payable (48,660) (358,986) (412,448)
Funding of capital
improvement escrows (16,000) (144,034) (135,675)
Disbursements from capital
improvement escrows 90,799 322,576 451,708
-------------- ------------- -------------
Net cash used in
financing activities (8,610,356) (13,315,578) (5,504,417)
-------------- ------------- -------------
Net change in cash and cash
equivalents (2,398,107) 2,855,404 (2,707,415)
Cash and cash equivalents at
beginning of year 4,440,715 1,585,311 4,292,726
-------------- ------------- -------------
Cash and cash equivalents at
end of year $ 2,042,608 $ 4,440,715 $ 1,585,311
============== ============= =============
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 (the "Partnership") has retained cash reserves
from the sale of its real estate investments for contingencies which exist or
may arise. The Partnership's operations currently consist of interest income
earned on short-term investments and the payment of administrative expenses.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold two properties. During 1997,
the Partnership sold its remaining property, the Balcones Woods Apartments. The
Partnership has retained a portion of the cash from property sales to satisfy
obligations of the Partnership as well as establish a reserve for
contingencies. The timing of the termination of the Partnership and final
distribution of cash will depend upon the nature and extent of liabilities and
contingencies which exist or may arise. Such contingencies may include legal
and other fees and costs stemming from litigation involving the Partnership
including, but not limited to, the lawsuit discussed in Note 15 of Notes to the
Financial Statements. In the absence of any such contingencies, the reserves
will be paid within twelve months of the last property being sold. In the event
a contingency continues to exist or 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 was computed using straight-line and accelerated
methods. Rates used in the determination of depreciation were based upon the
following estimated useful lives:
Years
-----
Buildings and improvements 20 to 30
Furniture and fixtures 5
Maintenance and repairs were charged to expense when incurred. Expenditures for
improvements were charged to the related asset account.
Interest incurred while properties were under construction was capitalized.
<PAGE>
As properties were sold, the related costs and accumulated depreciation were
removed from the respective accounts. Any gain or loss on disposition was
recognized in accordance with generally accepted accounting principles.
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 sales proceeds were 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 recorded its investments in real estate at the lower of cost or
fair value, and periodically assessed, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimated the fair value of its properties based on the current sales price
less estimated closing costs. Under SFAS 121, the General Partner determined
that no impairment in value had occurred prior to the sales of the properties.
The General Partner considered the method referred to above to result in a
reasonable measurement of a property's fair value, unless other factors
affecting the property's value indicated otherwise.
(d) Deferred expenses consisted of mortgage financing fees which were amortized
over the terms of the respective agreements. Upon sale, any remaining balance
was recognized as debt extinguishment expense and classified as an
extraordinary item.
(e) Revenue was 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 can not 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 from its disclosure
requirements.
(g) For financial statement purposes, in previous years partners were allocated
income and loss in accordance with the provisions in the Partnership Agreement.
In order for the capital accounts of the General Partner and Limited Partners
to appropriately reflect their remaining economic interests as provided for in
the Partnership Agreement, the income allocations between the partners have
been adjusted for financial statement purposes in 1997.
(h) Cash and cash equivalents include all unrestricted highly liquid
investments with an original maturity of three months or less. Cash is held or
invested primarily in one financial institution.
<PAGE>
(i) 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.
(j) Statement of Financial Accounting Standards, No. 128, "Earnings per Share"
was adopted by the Partnership for the year-ended December 31, 1997 and has
been applied to all prior earnings periods presented in the financial
statements. Since the Partnership has no dilutive securities, there is no
difference between basic and diluted net income per Limited Partnership
Interest.
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% and Limited Partners 95% of the profits and losses. However, it
further provides that profits and losses from property dispositions will be
allocated 1% to the General Partner and 99% to Limited Partners. For financial
statement purposes, in previous years partners were allocated income and loss
in accordance with the provisions in the Partnership Agreement. In order for
the capital accounts of the General Partner and Limited Partners to
appropriately reflect their remaining economic interests as provided for in the
Partnership Agreement, the income allocations between the partners have been
adjusted for financial statement purposes in 1997.
One hundred percent of Net Cash Receipts available for distribution was
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 was payable 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 not receive any
distribution of Net Cash Receipts or Net Cash Proceeds in accordance with these
provisions.
<PAGE>
5. Mortgage Note Payable:
As of December 31, 1996, the Partnership had a mortgage note payable
outstanding of $9,161,938 related to the Balcones Woods Apartments. During
1997, the property was sold and the purchaser took title subject to the
mortgage note as further described in Note 11 of Notes to the Financial
Statements.
During 1997, 1996 and 1995, the Partnership incurred interest expense on
mortgage notes payable of $126,547, $1,639,926 and $2,067,794 and paid interest
expense on mortgage notes payable of $147,831, $1,655,049 and $2,067,794,
respectively.
6. Repayment of 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, which represents a non-cash transaction to the Partnership.
Accordingly, the non-cash aspect of this transaction is not presented in the
Partnership's Statements of Cash Flows. 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.
7. Seller's Participation in Joint Venture:
The Balcones Woods Apartments was owned by a joint venture between the
Partnership and the seller. Consequently, the seller retained an interest in
the property through an interest in the joint venture. All assets, liabilities,
income and expenses of the joint venture were included in the financial
statements of the Partnership with the appropriate deduction from income, if
any, for the seller's participation in the joint venture. The property was sold
in March 1997. The seller did not receive any of the sales proceeds.
8. Management Agreement:
The Partnership's properties were under management agreements with a third
party management company prior to the sale of the properties. These management
agreements provided for annual fees of 5% of gross operating receipts.
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
<PAGE>
the net income for 1997 in the financial statements is $4,382,850 less than the
taxable income for the same period. The lower 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
principle and tax. Accumulated depreciation is a component of the calculation
of the gain on sale.
10. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/95
----------------- ----------------- -----------------
Paid Payable Paid Payable Paid Payable
------ --------- ------ --------- ------ ---------
Reimbursement of
expenses to
General Partner,
at cost:
Accounting $21,969 $6,531 $14,097 $11,335 $48,142 $4,054
Data processing 5,228 1,050 2,154 1,732 23,877 1,627
Investor com-
munications None None None None 6,608 None
Legal 14,798 4,366 11,454 9,210 21,721 2,539
Portfolio
management 40,809 12,882 47,960 38,564 109,487 12,306
Other 4,112 917 5,114 4,112 8,284 107
The Partnership participated in an insurance deductible program with other
affiliated partnerships in which the program paid claims up to the amount of
the deductible under the master insurance policies for its properties. The
program was administered by an affiliate of the General Partner who received no
fee for administering the program; however, the General Partner was reimbursed
for program expenses. The Partnership paid premiums to the deductible insurance
program of $8,062 and $52,047 in 1996 and 1995, respectively.
The Partnership had been 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.
11. Property Sales:
(a) In March 1997, the Partnership sold the Balcones Woods Apartments for
$15,800,000. The purchaser of the property took title subject to the existing
<PAGE>
first mortgage loan in the amount of $9,113,278, which represents a noncash
transaction to the Partnership. Accordingly, the noncash aspect of this
transaction is not presented in the Partnership's Statements of Cash Flows.
From the proceeds of the sale, the Partnership paid $369,746 in selling costs.
The basis of the property was $6,542,381, which is net of accumulated
depreciation of $5,118,951. For financial statement purposes, the Partnership
recognized a gain of $8,887,873 from the sale of this property.
(b) 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.
(c) In September 1996, the Partnership sold the Songbird-Phases I & II
Apartments in an all cash sale for $10,700,000. The purchaser of the property
took title subject to the existing first mortgage loan in the amount of
$7,015,499, which represents a noncash transaction to the Partnership.
Accordingly, the noncash aspect of this transaction is not presented in the
Partnership's Statements of Cash Flows. 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.
12. Extraordinary Items:
(a) In March 1997, the Partnership sold the Balcones Woods Apartments. In
connection with the sale, the Partnership wrote-off the remaining unamortized
deferred expenses in the amount of $229,431. This amount was recognized as an
extraordinary item and classified as debt extinguishment expense.
(b) In September 1996, the Partnership sold the Songbird-Phases I & II
Apartments. In connection with the sale, the Partnership wrote-off the
remaining unamortized deferred expenses in the amount of $192,960. This amount
was recognized as an extraordinary item and classified as debt extinguishment
expense.
(c) 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 expenses in the amount of
$2,969. These amounts were recognized as an extraordinary item and classified
as debt extinguishment expense.
13. Settlement Income:
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 received 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, 1997 and 1996 are as follows:
The carrying values of cash and cash equivalents, accounts and accrued interest
receivable and accounts payable approximate fair value.
Based on borrowing rates available to the Partnership at the end of 1996 for a
mortgage loan with a similar term and maturity, the fair value of the mortgage
note payable approximated 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 state
securities and common law violations with regard to the property acquisition
process of the Partnership, and 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 Event:
In January 1998, the Partnership made a distribution of $495,747 ($6.69 per
Interest) to the holders of Limited Partnership Interests representing a
distribution of remaining available Net Cash Proceeds.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2043
<SECURITIES> 0
<RECEIVABLES> 15
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2058
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2058
<CURRENT-LIABILITIES> 39
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2019
<TOTAL-LIABILITY-AND-EQUITY> 2058
<SALES> 0
<TOTAL-REVENUES> 9684
<CGS> 0
<TOTAL-COSTS> 458
<OTHER-EXPENSES> 285
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126
<INCOME-PRETAX> 8815
<INCOME-TAX> 0
<INCOME-CONTINUING> 8815
<DISCONTINUED> 0
<EXTRAORDINARY> (229)
<CHANGES> 0
<NET-INCOME> 8586
<EPS-PRIMARY> 68.37
<EPS-DILUTED> 68.37
</TABLE>
