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, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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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.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
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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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<PAGE>
BALCOR EQUITY PROPERTIES - XII
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
September 30, 1995 and December 31, 1994
(UNAUDITED)
ASSETS
1995 1994
------------ ------------
Cash and cash equivalents $ 254,691 $ 203,497
Escrow deposits 1,715,163 1,772,962
Accounts and accrued interest receivable 1,700 11,597
Prepaid expenses 165,082
Deferred expenses, net of accumulated
amortization of $142,068 in 1995 and
$96,606 in 1994 446,310 491,772
------------ ------------
2,582,946 2,479,828
------------ ------------
Investment in real estate, at cost:
Land 4,359,906 4,359,906
Buildings and improvements 39,092,614 39,058,120
------------ ------------
43,452,520 43,418,026
Less accumulated depreciation 19,660,802 18,709,661
------------ ------------
Investment in real estate, net of
accumulated depreciation 23,791,718 24,708,365
------------ ------------
$26,374,664 $27,188,193
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Loan payable - affiliate $ 715,724 $ 1,025,724
Accounts payable 104,013 124,906
Due to affiliates 24,703 103,393
Accrued liabilities, principally real estate
taxes and interest 623,590 427,130
Security deposits 155,501 144,449
Mortgage notes payable 30,187,664 30,487,859
------------ ------------
Total liabilities 31,811,195 32,313,461
Partners' deficit (37,447 Limited
Partnership Interests issued
and outstanding) (5,436,531) (5,125,268)
------------ ------------
$26,374,664 $27,188,193
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES - XII
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1995 and 1994
(UNAUDITED)
1995 1994
------------ ------------
Income:
Rental and service $ 6,879,522 $ 6,465,236
Interest on short-term investments 24,802 14,379
------------ ------------
Total income 6,904,324 6,479,615
------------ ------------
Expenses:
Interest on mortgage notes payable 2,167,765 2,165,497
Interest on short-term loans 43,077 23,416
Depreciation 951,141 951,141
Amortization of deferred expenses 45,462 58,133
Property operating 2,756,260 2,597,648
Real estate taxes 624,306 715,383
Property management fees 342,670 322,490
Administrative 284,906 265,917
------------ ------------
Total expenses 7,215,587 7,099,625
------------ ------------
Loss before extraordinary item (311,263) (620,010)
Extraordinary item:
Gain on forgiveness of debt 350,000
------------ ------------
Net loss $ (311,263) $ (270,010)
============ ============
Loss before extraordinary item
allocated to General Partner $ (3,113) $ (6,200)
============ ============
Loss before extraordinary item
allocated to Limited Partners $ (308,150) $ (613,810)
============ ============
Loss before extraordinary item per
Limited Partnership Interest
(37,447 issued and outstanding) $ (8.23) $ (16.39)
============ ============
Extraordinary item allocated
to General Partner None $ 3,500
============ ============
Extraordinary item allocated
to Limited Partners None $ 346,500
============ ============
Extraordinary item per Limited
Partnership Interest (37,447
issued and outstanding) None $ 9.25
============ ============
Net loss allocated to General Partner $ (3,113) $ (2,700)
============ ============
Net loss allocated to Limited Partners $ (308,150) $ (267,310)
============ ============
Net loss per Limited Partnership Interest
(37,447 issued and outstanding) $ (8.23) $ (7.14)
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES - XII
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1995 and 1994
(UNAUDITED)
1995 1994
------------ ------------
Income:
Rental and service $ 2,330,165 $ 2,198,271
Interest on short-term investments 3,948 4,535
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Total income 2,334,113 2,202,806
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Expenses:
Interest on mortgage notes payable 720,283 732,244
Interest on short-term loans 14,681 23,416
Depreciation 317,046 317,048
Amortization of deferred expenses 15,154 27,546
Property operating 1,066,830 858,601
Real estate taxes 203,511 249,716
Property management fees 117,295 109,933
Administrative 82,611 91,786
------------ ------------
Total expenses 2,537,411 2,410,290
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Net loss before extraordinary item (203,298) (207,484)
Extraordinary item:
Gain on forgiveness of debt 350,000
------------ ------------
Net (loss) income $ (203,298) $ 142,516
============ ============
Loss before extraordinary item
allocated to General Partner $ (2,033) $ (2,075)
============ ============
Loss before extraordinary item
allocated to Limited Partners $ (201,265) $ (205,409)
============ ============
Loss before extraordinary item per
Limited Partnership Interest
(37,447 issued and outstanding) $ (5.38) $ (5.48)
============ ============
Extraordinary item allocated
to General Partner None $ 3,500
============ ============
Extraordinary item allocated
to Limited Partners None $ 346,500
============ ============
Extraordinary item per Limited
Partnership Interest (37,447
issued and outstanding) None $ 9.25
============ ============
Net (loss) income allocated to
General Partner $ (2,033) $ 1,425
============ ============
Net (loss) income allocated to
Limited Partners $ (201,265) $ 141,091
============ ============
Net (loss) income per Limited Partnership
Interest (37,447 issued and outstanding) $ (5.38) $ 3.77
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES - XII
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1995 and 1994
(UNAUDITED)
1995 1994
------------ ------------
Operating activities:
Net loss $ (311,263) $ (270,010)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Extraordinary gain on forgiveness
of debt (350,000)
Depreciation of properties 951,141 951,141
Amortization of deferred expenses 45,462 58,133
Net change in:
Escrow deposits (218,886) (53,663)
Accounts and accrued interest
receivable 9,897 19,671
Prepaid expenses (165,082)
Accounts payable (20,893) (150,012)
Due to affiliates (78,690) 55,567
Accrued liabilities 196,460 238,991
Security deposits 11,052 1,805
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Net cash provided by operating activities 419,198 501,623
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Investing activities:
Improvements to properties (34,494) (13,499)
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Net cash used in investing activities (34,494) (13,499)
------------ ------------
Financing activities:
Proceeds from loan payable - affiliate 195,000
Repayment of loan payable - affiliate (505,000) (350,148)
Proceeds from refinancing of mortgage
notes payable 9,701,000
Repayment of mortgage notes payable (7,565,417)
Funding of capital improvement escrows (1,179,501)
Disbursements from capital improvement
escrows 276,685
Payment of deferred expenses (372,560)
Principal payments on mortgage notes
payable (300,195) (325,405)
------------ ------------
Net cash used in financing activities (333,510) (92,031)
------------ ------------
Net change in cash and cash equivalents 51,194 396,093
Cash and cash equivalents at beginning
of period 203,497 254,442
------------ ------------
Cash and cash equivalents at end of period $ 254,691 $ 650,535
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
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, 1995, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1995 and 1994, the Partnership
incurred and paid interest expense on mortgage notes payable to non-affiliates
of $2,167,765 and $2,056,783, 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, 1995 were:
Paid
-----------------------
Nine Months Quarter Payable
------------ --------- ---------
Property management fees $ 39,770 None None
Reimbursement of expenses to
the General Partner, at cost 143,900 $ 21,173 $ 20,278
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
Apartments 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 paid interest expense of $42,184 during the nine months ended
September 30, 1994. During the nine months ended September 30, 1995, the
Partnership made a net repayment of $310,000 to the General Partner. The
Partnership incurred interest expense of $43,077 and paid interest expense of
$47,796 on the General Partner loan during this period. As of September 30,
1995, the General Partner loan had a balance of $715,724, plus accrued interest
payable of $4,425. 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, 1995, this rate was 6.307%.
<PAGE>
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 1994 for a more complete
understanding of the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
During 1995, the Partnership's properties generated higher rental income due
to higher rental and/or occupancy rates. However, in July 1994, the
Partnership recognized a gain on forgiveness of debt related to the Sandridge
- - Phase I Apartments, which caused the Partnership's net loss to increase for
the nine months ended September 30, 1995 as compared to the same period in
1994 and resulted in net income for the quarter ended September 30, 1994 as
compared to a net loss for the same period in 1995. Further discussion of the
Partnership's operations is summarized below.
1995 Compared to 1994
- ---------------------
Unless otherwise noted, discussion of fluctuations between 1994 and 1995 refer
to both the quarter and nine months ended September 30, 1995 and 1994.
As a result of higher rental and/or occupancy rates at all of the
Partnership's properties, rental income increased for 1995 when compared to
1994.
The September 1994 refinancing of the Brierwood Apartments resulted in a
higher outstanding principal balance on the first mortgage loan and increased
interest expense on mortgage notes payable during the nine months and quarter
ended September 30, 1995 as compared to the same periods in 1994. The August
1994 retirement of the Sandridge - Phase I Apartments second mortgage loan
partially offset this increase for the nine months ended September 30, 1995
and fully offset the increase for the quarter ended September 30, 1995.
Due to the retirement and replacement of the Sandridge - Phase I Apartments
second mortgage loan with an unsecured General Partner loan in August 1994,
interest on short-term loans increased for the nine months ended September 30,
<PAGE>
1995 as compared to the same period in 1994. However, the 1995 net repayments
of the General Partner loan resulted in a decrease in interest on short-term
loans for the quarter ended September 30, 1995 as compared to the same period
in 1994.
As a result of exterior painting expenditures incurred at the Brierwood and
DeFoors Creek apartment complexes, property operating expenses increased for
1995 when compared to 1994.
A lower property assessment at the DeFoors Creek Apartments caused real estate
tax expense to decrease during 1995 when compared to 1994. This decrease was
partially offset by an increase in real estate taxes at the Somerset Village
Apartments due to a higher property assessment and a higher tax rate.
In July 1994, the Partnership repaid a $500,000 note payable to the seller of
the Sandridge - Phase I Apartments for $150,000, resulting in an extraordinary
gain on debt forgiveness of $350,000.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased as of September 30, 1995 when
compared to December 31, 1994. The Partnership's cash flow from its property
operations was primarily used to repay a portion of the General Partner loan.
During 1994, the Sandridge - Phase I Apartments' second mortgage loan of
$1,692,596 from an affiliate of the General Partner was retired and replaced
with an unsecured General Partner loan. The Partnership has partially repaid
the loan and owes $715,724 to the General Partner at September 30, 1995. This
loan is expected to be repaid from available cash flow from future property
operations, and from proceeds received from the disposition or refinancing of
the Partnership's real estate investments prior to any distributions to
Limited Partners.
Although an affiliate of the General Partner has, in certain circumstances,
provided mortgage loans for certain properties to the Partnership, there can
be no assurance that loans of this type will be available from either an
affiliate or the General Partner in the future. The General Partner may
continue to provide additional short-term loans to the Partnership or to fund
working capital needs or property operating deficits, although there is no
assurance that such loans will be available. Should such short-term loans not
be available, the General Partner will seek alternative third party sources of
financing working capital. However, the current economic environment and its
impact on the real estate industry make it unlikely that the Partnership would
be able to secure financing from third parties to fund working capital needs
or operating deficits. Should additional borrowings be needed and not be
available either through the General Partner or third parties, the Partnership
may be required to dispose of some of its properties to satisfy these
obligations.
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. The Partnership defines cash flow generated from its
properties as an amount equal to the property's revenue receipts less property
related expenditures, which include debt service payments. During the nine
<PAGE>
months ended September 30, 1995 and 1994, all of the properties except
Brierwood Apartments generated positive cash flow. The Brierwood Apartments
generated a marginal deficit during the nine months ended September 30, 1995
as compared to positive cash flow for the same period in 1994, primarily due
to exterior painting expenditures in 1995.
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 performance, and seeking rent increases
where market conditions allow. As of September 30, 1995, the occupancy rates
of the Partnership's properties ranged from 94% to 98%. Despite improvements
during 1994 and 1995 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 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. As a result of the General
Partner's 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.
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.
<PAGE>
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, 1995 is attached hereto.
(b) Reports on Form 8-K: No Reports were filed on Form 8-K during the
quarter ended September 30, 1995.
<PAGE>
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/Brian D. Parker
------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Partners-XII, the
General Partner
Date: November 9, 1995
--------------------------
<PAGE>
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 255
<SECURITIES> 0
<RECEIVABLES> 2
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2137
<PP&E> 43453
<DEPRECIATION> 19661
<TOTAL-ASSETS> 26375
<CURRENT-LIABILITIES> 908
<BONDS> 30903
<COMMON> 0
0
0
<OTHER-SE> 5436
<TOTAL-LIABILITY-AND-EQUITY> 26375
<SALES> 0
<TOTAL-REVENUES> 6904
<CGS> 0
<TOTAL-COSTS> 3723
<OTHER-EXPENSES> 1281
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2211
<INCOME-PRETAX> (311)
<INCOME-TAX> 0
<INCOME-CONTINUING> (311)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (311)
<EPS-PRIMARY> (8.23)
<EPS-DILUTED> (8.23)
</TABLE>
