SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - -----
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - -----
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-11126
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BALCOR EQUITY PROPERTIES-XII
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3169763
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
- - ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR EQUITY PROPERTIES-XII
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1994 and December 31, 1993
(Unaudited)
ASSETS
1994 1993
-------------- --------------
Cash and cash equivalents $ 650,535 $ 254,442
Escrow deposits 2,010,512 777,348
Accounts and accrued interest receivable 17,717 37,388
Deferred expenses, net of accumulated
amortization of $76,941 in 1994 and
$243,446 in 1993 511,573 197,146
-------------- --------------
3,190,337 1,266,324
-------------- --------------
Investment in real estate, at cost:
Land 4,359,906 4,359,906
Buildings and improvements 39,050,805 39,037,306
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43,410,711 43,397,212
Less accumulated depreciation 18,392,614 17,441,473
-------------- --------------
Investment in real estate, net
of accumulated depreciation 25,018,097 25,955,739
-------------- --------------
$ 28,208,434 $ 27,222,063
============== ==============
LIABILITIES AND PARTNERS' DEFICIT
Loan payable - affiliate $ 1,342,448
Accounts payable 67,303 $ 217,315
Due to affiliates 149,001 93,434
Accrued liabilities, principally real estate
taxes and interest 633,171 394,180
Security deposits 145,403 143,598
Mortgage note payable - affiliate 1,692,596
Purchase price, promissory and mortgage
notes payable 30,583,418 29,123,240
-------------- --------------
Total liabilities 32,920,744 31,664,363
Partners' deficit (37,447 Limited Partnership
Interests issued and outstanding) (4,712,310) (4,442,300)
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$ 28,208,434 $ 27,222,063
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
-------------- --------------
Income:
Rental and service $ 6,465,236 $ 6,115,140
Interest on short-term investments 14,379 14,193
-------------- --------------
Total income 6,479,615 6,129,333
-------------- --------------
Expenses:
Interest on purchase price, promissory
and mortgage notes payable 2,165,497 2,256,115
Interest on short-term loans 23,416
Depreciation 951,141 944,908
Amortization of deferred expenses 58,133 41,624
Property operating 2,597,648 2,440,595
Real estate taxes 715,383 677,114
Property management fees 322,490 307,384
Administrative 265,917 205,763
-------------- --------------
Total expenses 7,099,625 6,873,503
-------------- --------------
Loss before extraordinary item (620,010) (744,170)
Extraordinary item:
Gain on forgiveness of debt 350,000 196,519
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Net loss $ (270,010) $ (547,651)
============== ==============
Loss before extraordinary item
allocated to General Partner $ (6,200) $ (7,442)
============== ==============
Loss before extraordinary item
allocated to Limited Partners $ (613,810) $ (736,728)
============== ==============
Loss before extraordinary item per
Limited Partnership Interest
(37,447 issued and outstanding) $ (16.39) $ (19.67)
============== ==============
Extraordinary item allocated
to General Partner $ 3,500 $ 1,965
============== ==============
Extraordinary item allocated
to Limited Partners $ 346,500 $ 194,554
============== ==============
Extraordinary item per Limited
Partnership Interest (37,447
issued and outstanding) $ 9.25 $ 5.20
============== ==============
Net loss allocated to General Partner $ (2,700) $ (5,477)
============== ==============
Net loss allocated to Limited Partners $ (267,310) $ (542,174)
============== ==============
Net loss per Limited Partnership
Interest (37,447 issued and outstanding) $ (7.14) $ (14.47)
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1994 and 1993
(Unaudited)
1994 1993
-------------- --------------
Income:
Rental and service $ 2,198,271 $ 2,047,413
Interest on short-term investments 4,535 3,413
-------------- --------------
Total income 2,202,806 2,050,826
-------------- --------------
Expenses:
Interest on purchase price, promissory
and mortgage notes payable 732,244 723,507
Interest on short-term loans 23,416
Depreciation 317,048 314,971
Amortization of deferred expenses 27,546 15,292
Property operating 858,601 852,912
Real estate taxes 249,716 293,127
Property management fees 109,933 102,766
Administrative 91,786 74,855
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Total expenses 2,410,290 2,377,430
-------------- --------------
Loss before extraordinary item (207,484) (326,604)
Extraordinary item:
Gain on forgiveness of debt 350,000
-------------- --------------
Net income (loss) $ 142,516 $ (326,604)
============== ==============
Loss before extraordinary item
allocated to General Partner $ (2,075) $ (3,266)
============== ==============
Loss before extraordinary item
allocated to Limited Partners $ (205,409) $ (323,338)
============== ==============
Loss before extraordinary item per
Limited Partnership Interest
(37,447 issued and outstanding) $ (5.48) $ (8.63)
============== ==============
Extraordinary item allocated
to General Partner $ 3,500 None
============== ==============
Extraordinary item allocated
to Limited Partners $ 346,500 None
============== ==============
Extraordinary item per Limited
Partnership Interest (37,447
issued and outstanding) $ 9.25 None
============== ==============
Net income (loss) allocated to General Partner $ 1,425 $ (3,266)
============== ==============
Net income (loss) allocated to Limited Partners $ 141,091 $ (323,338)
============== ==============
Net income (loss) per Limited Partnership
Interest (37,447 issued and outstanding) $ 3.77 $ (8.63)
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XII
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
-------------- --------------
Operating activities:
Net loss $ (270,010) $ (547,651)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Extraordinary gain on forgiveness of debt (350,000) (196,519)
Depreciation of properties 951,141 944,908
Amortization of deferred expenses 58,133 41,624
Net change in:
Escrow deposits (53,663) (60,082)
Accounts and accrued interest
receivable 19,671 2,753
Accounts payable (150,012) (26,312)
Due to affiliates 55,567 13,631
Accrued liabilities 238,991 16,097
Security deposits 1,805 (1,413)
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Net cash provided by operating activities 501,623 187,036
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Investing activities:
Improvements to properties (13,499) (169,476)
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Net cash used in investing activities (13,499) (169,476)
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Financing activities:
Repayment of loan payable - affiliate (350,148)
Proceeds from refinancing of mortgage
notes payable 9,701,000 5,180,000
Repayment of mortgage notes payable (7,565,417) (4,900,000)
Funding of capital improvement escrows (1,179,501) (454,250)
Payment of deferred expenses (372,560) (112,140)
Principal payments on purchase price,
promissory and mortgage notes payable (325,405) (281,378)
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Net cash used in financing activities (92,031) (567,768)
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Net change in cash and cash equivalents 396,093 (550,208)
Cash and cash equivalents at beginning of
period 254,442 604,474
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Cash and cash equivalents at end of period $ 650,535 $ 54,266
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XII
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the nine months and quarter
ended September 30, 1994, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1994 and 1993, the Partnership
incurred and paid interest expense on purchase price, promissory and mortgage
notes payable to non-affiliates of $2,056,783 and $2,121,283,respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1994 are:
Paid
--------------------
Nine Months Quarter Payable
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Property management fees $324,360 $114,038 $77,075
Reimbursement of expenses to
the General Partner at cost:
Accounting 42,639 25,954 20,355
Data processing 15,436 6,935 17,459
Investor communication 4,192 2,552 3,232
Legal 11,673 7,105 5,350
Portfolio management 20,159 12,271 13,218
Other 13,470 7,106 4,036
During August 1994, the $1,692,596 second mortgage loan from an affiliate of
the General Partner, which was collateralized by the Sandridge - Phase I
apartment complex, was retired and replaced with an unsecured General Partner
loan. Prior to retirement of the loan, the Partnership incurred interest
expense of $108,714 and $134,832 and paid interest expense of $42,184 and
$150,077 during the nine months ended September 30, 1994 and 1993,
respectively. As of September 30, 1994, the General Partner loan had a balance
totaling $1,342,448, plus accrued interest payable thereon of $8,276. During
the nine months ended September 30, 1994, the Partnership incurred interest
expense on the General Partner loan of $23,416 and paid interest expense of
$15,140. Interest expense on the General Partner loan is computed at the
American Express Company cost of funds rate plus a spread to cover
administrative costs. As of September 30, 1994, this rate was 5.362%.
4. Loan Refinancings:
(a) In July 1994, the Partnership completed the refinancing of the Sandridge -
Phase I Apartments first mortgage loan. The principal balance on the prior loan
was $5,334,000 and bore interest at a rate of 9.025%. The terms of the new loan
provide for a $5,921,000 mortgage balance with a 9.275% interest rate, monthly
principal and interest payments of $48,818 and a maturity date of August 2001.
Total fees of $195,144 were paid in connection with the refinancing, and
approximately $555,000 was required to be deposited into a capital improvement
escrow. In addition, a $500,000 note payable due to the seller of the Sandridge
- - - Phase I Apartments was repaid for $150,000 resulting in an extraordinary gain
on forgiveness of debt of $350,000.
(b) In September 1994, the Partnership completed the refinancing of the
Brierwood Apartments first mortgage loan. The principal balance on the prior
loan was $2,081,417 and bore interest at a rate of 9.625%. The terms of the new
loan provide for a $3,780,000 mortgage balance with a 9.00% interest rate,
monthly principal and interest payments of $29,635 and a maturity date of
October 2029. Total fees of $177,416 were paid in connection with the
refinancing and approximately $624,000 was required to be deposited into a
capital improvement escrow.
BALCOR EQUITY PROPERTIES-XII
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Equity Properties-XII (the "Partnership") was formed in 1981 to invest
in and operate income-producing real property. The Partnership raised
$37,447,000 through the sale of Limited Partnership Interests and utilized
these proceeds to acquire seven real property investments and a minority joint
venture interest in one additional real property. During 1988, the Partnership
sold two of these properties, and in February 1992, the property in which the
Partnership held a minority joint venture interest was also sold. The
Partnership continues to operate its five remaining properties.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1993 for a more complete understanding of
the Partnership's financial position.
Operations
- - ----------
Summary of Operations
- - ---------------------
In July 1994, the Partnership recognized a gain on forgiveness of debt in
connection with the repayment of the note payable due to the seller of the
Sandridge - Phase I Apartments. In addition, rental income increased for
several properties due to higher rental and/or occupancy rates in 1994. These
are the primary reasons for the decrease in net loss for the nine months and
the change to net income for the quarter ended September 30, 1994 when compared
to the same periods in 1993. Further discussion of the Partnership's operations
are summarized below.
1994 Compared to 1993
- - ---------------------
As a result of higher rental and/or occupancy rates at the Cedar Ridge, Defoors
Creek and Somerset Village apartment complexes, rental and service income
increased for the nine months and quarter ended September 30, 1994 when
compared to the same periods in 1993.
Interest expense on purchase price, promissory and mortgage notes payable
decreased during the nine months ended September 30, 1994 when compared to the
same period in 1993 due to the interest rate reduction on the Somerset Village
mortgage loan during the third quarter of 1993 in accordance with the loan
agreement. The Cedar Ridge mortgage refinancing during the second quarter of
1993, which resulted in a lower interest rate and outstanding principal
balance, also contributed to the decrease.
In connection with the retirement and replacement of the second mortgage loan
collateralized by the Sandridge - Phase I apartment complex with an unsecured
General Partner loan, the Partnership recognized interest on short-term loans
during 1994.
The refinancings of the Sandridge - Phase I and Brierwood apartment complexes'
first mortgage loans required the payment of deferred expenses which are now
being amortized over the terms of the mortgage notes payable. As a result,
amortization expense increased for the nine months and quarter ended September
30, 1994 as compared to the same periods in 1993.
Property operating expense increased for the nine months ended September 30,
1994 when compared to the same period in 1993 primarily due to higher property
maintenance expenditures and insurance premiums at the Defoors Creek, Somerset
Village and Sandridge - Phase I apartment complexes, as well as higher utility
expenses at the Defoors Creek and Sandridge - Phase I apartment complexes. This
increase was partially offset by a decrease in property maintenance
expenditures at the Cedar Ridge Apartments.
As a result of increased accounting, portfolio management and legal fees,
administrative expenses increased during the nine months and quarter ended
September 30, 1994 when compared to the same periods in 1993.
In April 1993, the first mortgage loan collateralized by the Cedar Ridge
Apartments was refinanced. The Partnership obtained a discount in connection
with the repayment of the prior loan which resulted in a gain on debt
forgiveness of $196,519.
In July 1994, the Partnership repaid the $500,000 note payable due to the
seller of the Sandridge - Phase I Apartments for $150,000, resulting in a gain
on debt forgiveness of $350,000.
Liquidity and Capital Resources
- - -------------------------------
The cash position of the Partnership increased as of September 30, 1994 when
compared to December 31, 1993 due to improved property operations. The
Partnership's cash flow provided by operating activities was generated by cash
flow from the properties, which was partially offset by administrative
expenses. A portion of this cash was used in investing activities, which
consisted of capital expenditures for improvements at Brierwood Apartments. The
financing activities reflect proceeds from the refinancings of the Sandridge -
Phase I and Brierwood loans which were used for principal payments on the
Partnership's purchase price, promissory and mortgage notes payable, repayment
of loans payable-affiliate and payment of costs associated with the
refinancings.
The Partnership classifies the cash flow of its properties as either positive,
a marginal deficit or a significant deficit, each after consideration of debt
service payments unless otherwise indicated. A deficit is considered to be
significant if it exceeds $250,000 annually or 20% of the property's rental and
service income. During the first nine months of 1994 and 1993, the Brierwood,
Defoors Creek, Sandridge - Phase I and Somerset Village apartment complexes
generated positive cash flow. The Cedar Ridge Apartments generated positive
cash flow during the first nine months of 1994 as compared to a marginal cash
flow deficit for the same period in 1993 due to a decrease in interest expense
and property maintenance expenditures, as well as an increase in rental income.
While the cash flow of certain of the Partnership's properties has improved,
the General Partner continues to pursue a number of actions aimed at improving
the cash flow of the Partnership's properties including refinancing of mortgage
loans, improving property operating performance, and seeking rent increases
where market conditions allow. Despite improvements in the local economies and
rental markets where certain of the Partnership's properties are located, the
General Partner believes that continued ownership of many of the properties is
in the best interest of the Partnership in order to maximize potential returns
to Limited Partners. As a result, the Partnership will continue to own these
properties for longer than the holding period of the assets originally
described in the prospectus.
Each of the Partnership's properties is owned through the use of third-party
mortgage loan financing and, therefore, the Partnership is subject to the
financial obligations required by such loans. The mortgage loans collateralized
by the Sandridge - Phase I and Brierwood apartment complexes were refinanced in
July and September of 1994, respectively. In addition, the second mortgage loan
which was outstanding from an affiliate of the General Partner and
collateralized by the Sandridge - Phase I Apartments was retired and replaced
with an unsecured General Partner loan. See Notes 3 and 4 of Notes to Financial
Statements for additional information. As a result of the General Partner's
successful efforts to obtain loan modifications as well as refinancings of many
existing loans, the Partnership has no third party financing which matures
prior to 1998.
To date, investors have received distributions of Net Cash Receipts of $70 and
Net Cash Proceeds of $60.50 totaling $130.50 per $1,000 Interest, as well as
certain tax benefits. Future distributions will depend on improved cash flow
from the Partnership's remaining properties and proceeds from future property
sales, as to both of which there can be no assurances.
On November 4, 1994, The Balcor Company completed the sale of the assets of
Allegiance Realty Group, Inc. to an unaffiliated company, Insignia Allegiance
Management, Inc. ("Insignia"), which is based in Greenville, South Carolina. As
a result of this transaction, Insignia has assumed the management of the
Partnership's properties. This transaction is not expected to result in any
material change to the property management fees paid by the Partnership.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
BALCOR EQUITY PROPERTIES-XII
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits:
(4) Certificate of Limited Partnership set forth as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-11 dated July 2, 1982
(Registration No. 2-76947) and Form of Confirmation regarding Interests in the
Registrant set-forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1992 (Commission File No. 0-11126) are hereby
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1994 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR EQUITY PROPERTIES-XII
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Partners-XII, the General Partner
By: /s/Allan Wood
------------------------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer (Principal
Accounting and Financial Officer) of Balcor
Partners-XII, the General Partner
Date: November 14, 1994
--------------------------
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