UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-11127
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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
----
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 ]
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 its
interests in real estate. The Registrant sold its final real estate
investment in March 1997. The Registrant has retained a portion of the cash
from the property sales to satisfy obligations of the Registrant as well as
to establish a reserve for contingencies. The timing of the termination of
the Registrant and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Registrant including, but not limited to, the Bruss
lawsuit discussed in "Item 3. Legal Proceedings". Due to this litigation, the
Registrant will not be dissolved and reserves will be held by the Registrant
until the conclusion of such contingencies. There can be no assurances as to
the time frame for the conclusion of all contingencies.
The Registrant no longer has an ownership interest in any real estate
investment. The General Partner is not aware of any material potential
liability relating to environmental issues or conditions affecting real
estate formerly owned by the Registrant.
The officers and employees of 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
- ------------------
As of December 31, 1999, the Registrant did not own any properties.
In the opinion of the General Partner, the Registrant has obtained adequate
insurance coverage for property liability and property damage matters.
See Notes to Financial Statements for other information regarding former real
estate property investments.
Item 3. Legal Proceedings
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Bruss et al. vs. Lehman Brothers Inc., et al.
- --------------------------------------------
On January 25, 1999, a proposed class action complaint was filed, Dorothy
Bruss, et al vs. Lehman Brothers, Inc., et al (Superior Court of New Jersey,
Law Division, Essex County, Docket No. L-000898-99). The Partnership, ten
additional limited partnerships which were sponsored by The Balcor Company
(together with the Partnership, the "Affiliated Partnerships"), The Balcor
Company, American Express Company, Lehman Brothers, Inc., Smith Barney, Inc.,
American Express Financial Corporation, and other affiliated entities and 9
individuals were named defendants in the action. Lead counsel representing
the plaintiffs in this case is the same counsel which represented the
plaintiffs in the Lenore Klein case (which was dismissed). The Bruss
complaint raises largely the same issues as those raised in the Lenore Klein
case.
Upon the defendants' Motion to Dismiss, the Bruss complaint was dismissed
without prejudice on September 24, 1999. An amended complaint was filed on
November 30, 1999. The amended complaint differs from the original complaint
in that 8 of the 9 individual defendants and American Express Company were
deleted as defendants; the amended complaint also deletes 4 counts for breach
of fiduciary duty, breach of contract, conspiracy and violations of the New
Jersey RICO statute and similar statutes of other states. The amended
complaint alleges, common law fraud, equitable fraud, negligent
misrepresentation and violation of certain New Jersey and other similar
state 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
property for the Affiliated Partnerships. The 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; recovery from the
Defendants of all profits received by them as a result of their alleged
actions relating to the Affiliated Partnerships; and attorneys' fees and
other costs.
The defendants filed a new Motion to Dismiss on January 31, 2000. The
defendants intend to vigorously contest this action. No class has been
certified as of this date. Management of each of the defendants believes that
it has meritorious defenses to contest the claims.
Madison Partnership Liquidity Investors XX, et al. vs. The Balcor Company, et
- -----------------------------------------------------------------------------
al.
- ----
Sandra Dee vs. The Balcor Company, et al.
- -----------------------------------------
On May 7, 1999, a proposed class action complaint was filed and on May 13,
1999 was served on the defendants, Madison Partnership Liquidity Investors
XX, et al. vs. The Balcor Company, et al. (Circuit Court, Chancery Division,
Cook County, Illinois, Docket No. 99CH 08972). The General Partner of the
Partnership, the general partners of twenty-one additional limited
partnerships which were sponsored by The Balcor Company, The Balcor Company
and one individual are named as defendants in this action. The Partnership
and the twenty-one additional limited partnerships are referred to herein as
the "Affiliated Partnerships". Plaintiffs are entities that initiated tender
offers to purchase units and, in fact, purchased units in eleven of the
Affiliated Partnerships.
On June 1, 1999, a proposed class action complaint was filed and on August
16, 1999 was served on the defendants, Sandra Dee vs. The Balcor Company, et
al. (Circuit Court, Chancery Division, Cook County, Illinois, Docket No. 99CH
08123). This complaint is identical in all material respects to the Madison
Partnership Liquidity Investors XX, et al. vs. The Balcor Company et al.
complaint filed in May 1999. The defendants filed on September 15, 1999 a
motion to consolidate the Dee case with the Madison Partnership case. On
September 20, 1999, the motion was granted and this case was consolidated
with the Madison Partnership case.
The complaints allege breach of fiduciary duties and breach of contract under
the partnership agreements for each of the Affiliated Partnerships. The
complaints seek the winding up of the affairs of the Affiliated Partnerships,
the establishment of a liquidating trust for each of the Affiliated
Partnerships until a resolution of all contingencies occurs, the appointment
of an independent trustee for each such liquidating trust and the
distribution of a portion of the cash reserves to limited partners. The
complaints also seek compensatory damages, punitive and exemplary damages,
and costs and expenses in pursuing the litigation.
The defendants filed motions to dismiss the complaints on July 14, 1999 and
on September 15, 1999. On January 19, 2000 a hearing on the motions was held
and the class allegations in the complaints were struck regarding the
Partnership and ten of the Affiliated Partnerships in which plaintiffs do not
own interests. In all other respects, the motions to dismiss were denied.
While the court directed the plaintiffs to file an amended complaint by
February 18, 2000, as of this date they have yet to do so.
The defendants intend to vigorously contest this action. No class has been
certified as of this date.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1999.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
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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, 1999, the number of record holders of Limited Partnership
Interests of the Registrant was 6,753.
Item 6. Selected Financial Data
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Year ended December 31,
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1999 1998 1997 1996 1995
---------- ---------- ----------- ----------- ---------
Total income $69,826 $80,329 $796,322 $6,436,334 $7,524,577
(Loss) income before
gains on sales of
properties and
extraordinary
items (94,247) (130,005) (72,860) 496,141 759,384
Net (loss) income (94,247) (130,005) 8,585,582 12,397,719 4,003,564
Net (loss) income
per Limited Part-
nership Interest-
Basic and Diluted (1.27) (1.75) 68.37 165.30 53.06
Total assets 1,412,346 1,469,998 2,057,530 11,702,171 20,030,290
Mortgage notes
payable None None None 9,161,938 23,603,034
Cash distributions
per Limited Part-
nership Interest(A) None 6.69 116.50 78.00 72.95
(A) This amount includes distributions of original capital of $6.69, $112.50,
$63.00 and $63.50 per Limited Partnership Interest for 1998, 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
- ----------
Summary of Operations
- ---------------------
The operations of Balcor Realty Investors Ltd.-82 (the "Partnership") in 1999
and 1998 consisted primarily of administrative expenses which were partially
offset by interest income earned on short-term investments. Primarily as a
result of lower administrative expenses in 1999, the Partnership's net loss
decreased during 1999 as compared to 1998. The Partnership sold its remaining
property in 1997 and recognized a gain in connection with the sale. As a
result of the gain recognized in connection with the 1997 property sale, the
Partnership recognized net income during 1997 as compared to a net loss
during 1998. Further discussion of the Partnership's operations is summarized
below.
1999 Compared to 1998
- ---------------------
As a result of lower interest rates during 1999 and higher average cash
balances in 1998 prior to a distribution to Limited Partners in January 1998,
interest income on short-term investments decreased during 1999 as compared
to 1998.
During 1998, the Partnership paid additional real estate taxes related to the
Balcones Woods Apartments, which was sold in 1997.
Primarily due to a decrease in accounting, investor processing and bank
charges, administrative expenses decreased during 1999 as compared to 1998.
1998 Compared to 1997
- ---------------------
During 1997, the Partnership sold the Balcones Woods Apartments and
recognized a gain on sale of $8,887,873. As a result of the sale of this
property, rental and service income, interest expense on mortgage notes
payable, depreciation, amortization, property operating expense and property
management fees ceased in 1997.
Higher average cash balances were available for investment during 1997 due to
the proceeds received in connection with the 1996 and 1997 property
sales prior to distribution to Limited Partners in 1997 and January 1998.
This resulted in a decrease in interest income on short-term investments
during 1998 as compared to 1997.
The Partnership recognized other income during 1997 in connection with a
partial refund of prior years' insurance premiums relating to the
Partnership's properties.
During 1997, the Partnership wrote-off the remaining unamortized deferred
expenses of $229,431 in connection with the sale of the Balcones Woods
Apartments. This amount was recognized as debt extinguishment expense and
classified as an extraordinary item for financial statement purposes.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $58,000 as of
December 31, 1999 when compared to December 31, 1998 due to cash used in
operating activities for the payment of administrative expenses, which was
partially offset by interest income earned on short-term investments.
The Partnership Agreement provides for the dissolution of the Partnership
upon the occurrence of certain events, including the disposition of all
its interests in real estate. The Partnership sold its final real estate
investment in March 1997. The Partnership has retained a portion of the cash
from the property sales to satisfy obligations of the Partnership as well as
to establish a reserve for contingencies. The timing of the termination of
the Partnership and final distribution of cash will depend upon the nature
and extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Partnership including, but not limited to, the Bruss
lawsuit discussed in "Item 3. Legal Proceedings". Due to this litigation, the
Partnership will not be dissolved and reserves will be held by the
Partnership until the conclusion of such contingencies. There can be no
assurances as to the time frame for the conclusion of all contingencies.
The Partnership made distributions totaling $6.69 and $116.50 per Interest in
1998 and 1997, respectively. The Partnership made no distributions in 1999.
See Statement of Partner's Capital (Deficit) for additional information.
Distributions were comprised of $6.69 of Net Cash Proceeds in 1998 and $4.00
of Net Cash Receipts and $112.50 of Net Cash Proceeds in 1997.
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.
The Partnership believes that its key vendors were Year 2000 compliant with
respect to the Partnership's operations as of December 31, 1999 and that
there was no material effect on the business, financial position or results
of operations of the Partnership related to Year 2000 issues.
Certain statements in this report constitute "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements may include statements regarding income or losses as well as
assumptions relating to the foregoing.
The forward-looking statements made by the Partnership are subject to known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to differ from any
future results, performance or achievements expressed or implied by the
forward-looking statements.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
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The supplemental financial information specified by Item 305 of Regulation
S-K is not applicable.
Item 8. Financial Statements and Supplementary Data
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See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation
S-K is not applicable.
The net effect of the differences between the financial statements and the
tax returns is summarized as follows:
December 31, 1999 December 31, 1998
------------------------ ------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
----------- ----------- ----------- -----------
Total assets $1,412,346 $9,706,707 $1,469,998 $9,765,253
Partners' capital
(deficit):
General Partner (112,239) (107,232) (112,239) (107,232)
Limited Partners 1,411,344 9,700,697 1,505,591 9,795,839
Net (loss) income:
General Partner None None None 5,007
Limited Partners (94,247) (95,142) (130,005) (138,996)
Per Limited
Partnership
Interest (1.27)(A) (1.28) (1.75)(A) (1.87)
(A) Amount represents basic and diluted net loss per Limited Partnership
Interest.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
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There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
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(a) Neither the Registrant nor 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 Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 52) joined Balcor in July 1979. He is Chairman, President
and Chief Executive Officer and has responsibility for all ongoing day-to-day
activities at Balcor. He is a member of the board of directors of The Balcor
Company. He is also Senior Vice President of American Express Company and is
responsible for its real estate operations worldwide. Prior to joining Balcor,
Mr. Meador was employed at the Harris Trust and Savings Bank in the commercial
real estate division where he was involved in various lending activities. Mr.
Meador received his M.B.A. degree from the Indiana University Graduate School
of Business.
Mr. Meador is on the Board of Directors of AMLI Commercial Properties Trust, a
private real estate investment trust that owns office and industrial buildings
in the Chicago, Illinois area. Mr. Meador was elected to the Board of AMLI
Commercial Properties Trust in August 1998.
Jayne A. Kosik (age 42) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. Ms. Kosik is also a member of the board of directors of The Balcor
Company. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Senior Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.
(d) There is no family relationship between any of the foregoing officers.
(e) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1999, except that Mr. Meador is named in his capacity as an
officer of Balcor, as a defendant in the Madison/Dee lawsuit described in "Item
3. Legal Proceedings".
Item 11. Executive Compensation
- -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of the General Partner. The executive officers
receive compensation from The Balcor Company (but not from the Registrant) for
services performed for various affiliated entities, which may include services
performed for the Registrant. However, the General Partner believes that any
such compensation attributable to services performed for the Registrant is
immaterial to the Registrant. See Note 9 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 do not own any
Limited Partnership Interests.
In addition, Balcor LP Corp., an affiliate of the General Partner, holds title
to 73 Limited Partnership Interests in the Partnership due exclusively to
instances in which Limited Partners abandoned title to their Limited
Partnership Interests. Balcor LP Corp. is a nominee holder only of such
Interests and has disclaimed any economic or beneficial ownership in said
Interests. All distributions of cash payable with respect to such Interests
held by Balcor LP Corp. are returned to the Partnership for distribution to
other Limited Partners in accordance with the Partnership Agreement.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
(a & b) See Note 4 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 9 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.
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 June 30, 1992 are incorporated herein by
reference.
(27) Financial Data Schedule of the Registrant for 1999 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1999.
(c) Exhibits: See item 14(a)(3) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALCOR REALTY INVESTORS LTD.-82
By:/s/Jayne A. Kosik
---------------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial Officer)
of Balcor Partners-XI, the General
Partner
Date: March 28, 2000
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
---------------------- ------------------------------- ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Partners-XI,
/s/Thomas E. Meador the General Partner March 28, 2000
- -------------------- --------------
Thomas E. Meador
Senior Managing Director and
Chief Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Partners-XI, the
General Partner
/s/Jayne A. Kosik March 28, 2000
-------------------- --------------
Jayne A. Kosik
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1999 and 1998
Statements of Partners' Capital (Deficit), for the years ended December 31,
1999, 1998 and 1997
Statements of Income and Expenses, for the years ended December 31, 1999, 1998
and 1997
Statements of Cash Flows, for the years ended December 31, 1999, 1998 and 1997
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Realty Investors Ltd.-82:
In our opinion, the accompanying balance sheets and the related statements of
partners' capital (deficit), of income and expenses and of cash flows present
fairly, in all material respects, the financial position of Balcor Realty
Investors Ltd.-82 An Illinois Limited Partnership (the "Partnership") at
December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As described in Note 2 to the financial statements, the partnership agreement
provides for the dissolution of the Partnership upon the occurrence of certain
events, including the disposition of all its interests in real estate. The
Partnership no longer has an ownership interest in any real estate investment.
As described in Note 12, the Partnership has contingencies related to
litigation. Upon resolution of the litigation contingency matters, the
Partnership intends to cease operations and dissolve.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 28, 2000
BALCOR REALTY INVESTORS LTD.- 82
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
1999 1998
------------ ------------
Cash and cash equivalents $ 1,405,312 $ 1,463,768
Accounts and accrued interest receivable 7,034 6,230
------------ ------------
$ 1,412,346 $ 1,469,998
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 81,267 $ 54,999
Due to affiliates 31,974 21,647
------------ ------------
Total liabilities 113,241 76,646
------------ ------------
Commitments and contingencies
Limited Partners' capital
(74,133 Interests issued
and outstanding) 1,411,344 1,505,591
General Partners' deficit (112,239) (112,239)
------------ ------------
Total partners' capital 1,299,105 1,393,352
------------ ------------
$ 1,412,346 $ 1,469,998
============ ============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS LTD.- 82
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
for the years ended December 31, 1999, 1998 and 1997
Partners' Capital (Deficit) Accounts
----------------------------------------
General Limited
Total Partner Partners
------------ ------------ ------------
Balance at December 31, 1996 $ 2,070,017 $ (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
Cash distribution to
Limited Partners (A) (495,747) (495,747)
Net loss for the year
ended December 31, 1998 (130,005) (130,005)
------------ ------------ ------------
Balance at December 31, 1998 1,393,352 (112,239) 1,505,591
Net loss for the year
ended December 31, 1999 (94,247) (94,247)
------------ ------------ ------------
Balance at December 31, 1999 $ 1,299,105 $ (112,239) $ 1,411,344
============ ============ ============
(A) Summary of cash distributions paid per Limited Partnership Interest:
1999 1998 1997
------------ ------------ ------------
First Quarter None $ 6.69 $ 54.00
Second Quarter None None 55.00
Third Quarter None None 7.50
Fourth Quarter None None None
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS LTD.- 82
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997
------------ ------------ ------------
Income:
Rental and service $ 644,285
Interest on short-term
investments $ 69,826 $ 80,329 133,138
Other 18,899
------------ ------------ ------------
Total income 69,826 80,329 796,322
------------ ------------ ------------
Expenses:
Interest on mortgage
note payable 126,547
Depreciation 62,414
Amortization of deferred
expenses 7,307
Property operating 360,943
Real estate taxes 8,950 64,727
Property management fees 32,133
Administrative 164,073 201,384 215,111
------------ ------------ ------------
Total expenses 164,073 210,334 869,182
------------ ------------ ------------
Loss before gain on
sale of property and
extraordinary item (94,247) (130,005) (72,860)
Gain on sale of property 8,887,873
------------ ------------ ------------
(Loss) income before
extraordinary item (94,247) (130,005) 8,815,013
Extraordinary item:
Debt extinguishment expense (229,431)
------------ ------------ ------------
Net (loss) income $ (94,247) $ (130,005) $ 8,585,582
============ ============ ============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS LTD.- 82
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1999, 1998 and 1997
(Continued)
(Loss) income before extraordinary
item allocated to General Partner None None $ 3,611,453
============ ============ ============
(Loss) income before extraordinary
item allocated to Limited
Partners $ (94,247) $ (130,005) $ 5,203,560
============ ============ ============
(Loss) income before extraordinary
item per Limited Partnership
Interest (74,133 issued and
outstanding)-Basic and Diluted $ (1.27) $ (1.75) $ 70.20
============ ============ ============
Extraordinary item allocated
to General Partner None None $ (93,996)
============ ============ ============
Extraordinary item allocated
to Limited Partners None None $ (135,435)
============ ============ ============
Extraordinary item per Limited
Partnership Interest (74,133
issued and outstanding)-
Basic and Diluted None None $ (1.83)
============ ============ ============
Net (loss) income allocated to
General Partner None None $ 3,517,457
============ ============ ============
Net (loss) income allocated to
Limited Partners $ (94,247) $ (130,005) $ 5,068,125
============ ============ ============
Net (loss) income per Limited
Partnership Interest (74,133
issued and outstanding)-
Basic and Diluted $ (1.27) $ (1.75) $ 68.37
============ ============ ============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS LTD.- 82
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997
------------ ------------ ------------
Operating activities:
Net (loss) income $ (94,247) $ (130,005) $ 8,585,582
Adjustments to reconcile net
(loss) income to net cash
used in operating activities:
Gain on sale of property (8,887,873)
Debt extinguishment expense 229,431
Depreciation of properties 62,414
Amortization of deferred
expenses 7,307
Net change in:
Escrow deposits 245,881
Accounts and accrued
interest receivable (804) 8,692 60,602
Prepaid expenses 23,719
Accounts payable 26,268 42,319 (34,318)
Due to affiliates 10,327 (4,099) (39,207)
Accrued liabilities (310,641)
Security deposits (47,624)
------------ ------------ ------------
Net cash used in operating
activities (58,456) (83,093) (104,727)
------------ ------------ ------------
Investing activities:
Proceeds from sale of
real estate 6,686,722
Payment of selling costs (369,746)
------------
Net cash provided by
investing activities 6,316,976
------------
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS LTD.- 82
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
(Continued)
Financing activities:
Distributions to
Limited Partners $ (495,747) $ (8,636,495)
Principal payments on
mortgage note payable (48,660)
Funding of capital
improvement escrow (16,000)
Disbursements from capital
improvement escrow 90,799
------------ ------------
Net cash used in
financing activities (495,747) (8,610,356)
------------ ------------
Net change in cash and cash
equivalents $ (58,456) (578,840) (2,398,107)
Cash and cash equivalents at
beginning of year 1,463,768 2,042,608 4,440,715
------------ ------------ ------------
Cash and cash equivalents at
end of year $ 1,405,312 $ 1,463,768 $ 2,042,608
============ ============ ============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS LTD.-82
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. 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 its
interests in real estate. The Partnership sold its final real estate investment
in March 1997. The Partnership has retained a portion of the cash from the
property sales to satisfy obligations of the Partnership as well as to
establish a reserve for contingencies. The timing of the termination of the
Partnership and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Partnership including, but not limited to, the Bruss
lawsuit discussed in Note 12 of Notes to Financial Statements. Due to this
litigation, the Partnership will not be dissolved and reserves will be held by
the Partnership until the conclusion of such contingencies. There can be no
assurances as to the time frame for the conclusion of all contingencies.
3. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) Depreciation expense was computed using 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.
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.
(c) The Partnership recorded its investments in real estate at the lower of
cost or fair value, and periodically assessed, but not less than on an annual
basis, possible impairment to the value of its properties. The General Partner
estimated the fair value of its properties based on the current sales price
less estimated closing costs. The General Partner 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 is recognized on an accrual basis in accordance with generally
accepted accounting principles.
(f) The Partnership calculates the fair value of its financial instruments
based on estimates using present value techniques. The Partnership includes
this additional information in the notes to the financial statements when the
fair value is different than the carrying value of those financial instruments.
When the fair value reasonably approximates the carrying value, no additional
disclosure is made.
(g) In order for the capital account balances to more accurately reflect the
partners' remaining economic interests in the Partnership, the income (loss)
allocations have been adjusted.
(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 in one financial institution.
(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 effective for the year ended December 31, 1997.
Since the Partnership has no dilutive securities, there is no difference
between basic and diluted net income (loss) per Limited Partnership Interest.
4. Partnership Agreement:
The Partnership was organized during June 1981. The Partnership Agreement
provided 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. In order for
the capital account balances to more accurately reflect the partners' remaining
economic interests in the Partnership, the (loss) income allocations have been
adjusted.
One hundred percent of Net Cash Receipts available for distribution was
distributed to the holders of Interests. Under certain circumstances, the
General Partner would have participated in the Net Cash Proceeds from (i) the
refinancing of Partnership properties and (ii) the sale of Partnership
properties. Since the required subordination levels were not met, the General
Partner has not received any distributions of Net Cash Receipts or Net Cash
Proceeds during the lifetime of the Partnership.
5. Mortgage Note Payable:
During 1997, the Partnership incurred interest expense on mortgage note payable
of $126,547 and paid interest expense on mortgage notes payable of $147,831.
6. 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.
7. Management Agreement:
The Partnership's properties were managed by a third party management company
prior to the sale of the properties. These management agreements provided for
annual fees of 5% of gross operating receipts.
8. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, will differ from the
tax returns due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net loss for 1999 in the financial statements is $895 less than the taxable
loss for the same period.
9. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/99 12/31/98 12/31/97
----------------- ----------------- -----------------
Paid Payable Paid Payable Paid Payable
------ --------- ------ --------- ------ ---------
Reimbursement of
expenses to
General Partner,
at cost:
Accounting $7,726 $7,860 $7,196 $4,906 $21,969 $ 6,531
Data processing 4,798 7,447 2,224 872 1,979 None
Legal 3,119 4,932 5,304 3,662 14,798 4,366
Portfolio
management 11,690 11,735 17,710 12,207 44,058 13,932
Other None None 917 None 4,112 917
Subject to the provisions of the partnership agreement, the Partnership has
agreed to advance the legal fees incurred by the General Partner in defending
the Madison Partnership lawsuit discussed in Note 12 of Notes to Financial
Statements.
10. Property Sales:
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, 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.
11. Extraordinary Item:
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.
12. Contingencies:
(a) The Partnership is currently involved in a lawsuit, Bruss, et al. vs.
Lehman Brothers, Inc., et al., whereby the Partnership and certain affiliates
have been named as defendants alleging substantially similar claims involving
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 marketing efforts related to,
the offering of the Limited Partnership Interests of the Partnership. The Bruss
complaint was filed on January 25, 1999. On September 24, 1999, the court
granted the defendants' motion to dismiss the complaint for failure to state a
cause of action. The plaintiffs filed an amended complaint on November 30,
1999. The defendants have filed a motion to dismiss the complaint for failure
to state a cause of action. The defendants continue to vigorously contest this
action. It is not determinable at this time how the outcome of this action will
impact the remaining cash reserves of the Partnership. The Partnership believes
it has meritorious defenses to contest this claim.
(b) In May 1999, a lawsuit was filed, Madison Partnership Liquidity Investors
XX, et al. vs. The Balcor Company, et al. whereby the General Partner and
certain affiliates have been named as defendants. The plaintiffs are entities
that initiated tender offers to purchase and, in fact, purchased units in
eleven affiliated partnerships. The complaint alleges breach of fiduciary
duties and breach of contract under the partnership agreement and seeks the
winding up of the affairs of the Partnership, the establishment of a
liquidating trust, the appointment of an independent trustee for the trust and
the distribution of a portion of the cash reserves to limited partners. On June
1, 1999 a second lawsuit was filed and was served on August 16, 1999, Sandra
Dee vs. The Balcor Company, et al. The Dee complaint is virtually identical to
the Madison Partnership complaint and on September 20, 1999 was consolidated
into the Madison Partnership case. On January 19, 2000, a hearing was held on
the defendants' motion to dismiss the complaint; at the hearing the class
allegations were struck regarding eleven of the partnerships, including the
Partnership. The defendants intend to vigorously contest these actions. It is
not determinable at this time how the outcome of these actions will impact the
remaining cash reserves of the Partnership.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1405
<SECURITIES> 0
<RECEIVABLES> 7
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1412
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1412
<CURRENT-LIABILITIES> 113
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1299
<TOTAL-LIABILITY-AND-EQUITY> 1412
<SALES> 0
<TOTAL-REVENUES> 70
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 164
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (94)
<INCOME-TAX> 0
<INCOME-CONTINUING> (94)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94)
<EPS-BASIC> (1.27)
<EPS-DILUTED> (1.27)
</TABLE>
