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, 1997
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the transition period from to
------------ ------------
Commission file number 0-11126
-------
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 (847) 267-1600
--------------
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
----- -----
BALCOR EQUITY PROPERTIES - XII
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1997 and December 31, 1996
(Unaudited)
ASSETS
1997 1996
----------------- ----------------
Cash and cash equivalents $ 1,820,869 $ 19,824,096
Accounts and accrued interest
receivable 7,933 315,188
----------------- ----------------
$ 1,828,802 $ 20,139,284
================= ================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 8,760 $ 214,819
Due to affiliates 45,640 74,926
----------------- ----------------
Total liabilities 54,400 289,745
----------------- ----------------
Commitments and contingencies
Limited Partners' capital (37,447
Interests issued and outstanding) 1,816,402 19,891,539
General Partner's deficit (42,000) (42,000)
----------------- ----------------
Total partners' capital 1,774,402 19,849,539
----------------- ----------------
$ 1,828,802 $ 20,139,284
================= ================
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, 1997 and 1996
(Unaudited)
1997 1996
----------------- ----------------
Income:
Rental and service $ 7,148,080
Interest on short-term
investments $ 242,678 81,869
Other income 15,821
----------------- ----------------
Total income 258,499 7,229,949
----------------- ----------------
Expenses:
Interest on mortgage notes
payable 2,129,788
Interest on short-term loan -
affiliate 21,147
Depreciation 940,908
Amortization of deferred expenses 44,986
Property operating 74,437 2,753,644
Real estate taxes 42,742 536,391
Property management fees 345,841
Administrative 135,173 296,823
----------------- ----------------
Total expenses 252,352 7,069,528
----------------- ----------------
Income before gain on sale of
properties and extraordinary item 6,147 160,421
Gain on sale of properties 8,142,528
----------------- ----------------
Income before extraordinary
item 6,147 8,302,949
Extraordinary item:
Debt extinguishment expense (208,744)
----------------- ----------------
Net income $ 6,147 $ 8,094,205
================= ================
Income before extraordinary
item allocated to General Partner None $ 83,029
================= ================
Income before extraordinary
item allocated to Limited
Partners $ 6,147 $ 8,219,920
================= ================
<PAGE>
BALCOR EQUITY PROPERTIES - XII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
----------------- ----------------
Income before extraordinary
item per Limited Partnership
Interest (37,447 issued and
outstanding) $ 0.16 $ 219.51
================= ================
Extraordinary item allocated
to General Partner None $ (2,087)
================= ================
Extraordinary item allocated
to Limited Partners None $ (206,657)
================= ================
Extraordinary item per Limited
Partnership Interest (37,447
issued and outstanding) None $ (5.52)
================= ================
Net income allocated to
General Partner None $ 80,942
================= ================
Net income allocated to
Limited Partners $ 6,147 $ 8,013,263
================= ================
Net income per Limited
Partnership Interest (37,447
issued and outstanding) $ 0.16 $ 213.99
================= ================
Distributions to Limited Partners $ 18,081,284 None
================= ================
Distributions per Limited
Partnership Interest $ 482.85 None
================= ================
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, 1997 and 1996
(Unaudited)
1997 1996
----------------- ----------------
Income:
Rental and service $ 2,278,472
Interest on short-term
investments $ 25,429 10,869
Other income 15,821
----------------- ----------------
Total income 41,250 2,289,341
----------------- ----------------
Expenses:
Interest on mortgage notes
payable 691,952
Interest on short-term loan -
affiliate 4,171
Depreciation 303,356
Amortization of deferred expenses 14,679
Property operating 10,700 879,502
Real estate taxes 190,955
Property management fees 105,474
Administrative 24,560 101,455
----------------- ----------------
Total expenses 35,260 2,291,544
----------------- ----------------
Income (loss) before gain on sale of
properties and extraordinary item 5,990 (2,203)
Gain on sale of properties 8,142,528
----------------- ----------------
Income before extraordinary
item 5,990 8,140,325
Extraordinary item:
Debt extinguishment expense (208,744)
----------------- ----------------
Net income $ 5,990 $ 7,931,581
================= ================
Income before extraordinary
item allocated to General Partner None $ 81,403
================= ================
Income before extraordinary
item allocated to Limited
Partners $ 5,990 $ 8,058,922
================= ================
<PAGE>
BALCOR EQUITY PROPERTIES - XII
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
----------------- ----------------
Income before extraordinary
item per Limited Partnership
Interest (37,447 issued and
outstanding) $ 0.15 $ 215.21
================= ================
Extraordinary item allocated
to General Partner None $ (2,087)
================= ================
Extraordinary item allocated
to Limited Partners None $ (206,657)
================= ================
Extraordinary item per Limited
Partnership Interest (37,447
issued and outstanding) None $ (5.52)
================= ================
Net income allocated to
General Partner None $ 79,316
================= ================
Net income allocated to
Limited Partners $ 5,990 $ 7,852,265
================= ================
Net income per Limited
Partnership Interest (37,447
issued and outstanding) $ 0.15 $ 209.69
================= ================
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, 1997 and 1996
(Unaudited)
1997 1996
----------------- ----------------
Operating activities:
Net income $ 6,147 $ 8,094,205
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Gain on sale of properties (8,142,528)
Debt extinguishment expense 208,744
Depreciation of properties 940,909
Amortization of deferred
expenses 44,986
Net change in:
Escrow deposits 201,601
Accounts and accrued
interest receivable 307,255 (650,534)
Prepaid expenses (87,850)
Accounts payable (206,059) 127,310
Due to affiliates (29,286) 29,458
Accrued liabilities (261,949)
Security deposits (75,149)
----------------- ----------------
Net cash provided by operating
activities 78,057 429,203
----------------- ----------------
Investing activities:
Proceeds from sale of properties 16,350,000
Payment of selling costs (384,840)
----------------
Net cash provided by
investing activities 15,965,160
----------------
Financing activities:
Distributions to Limited Partners (18,081,284)
Repayment of loan payable -
affiliate (705,724)
Repayment of mortgage notes
payable (10,070,865)
Proceeds from the release of
capital improvement escrows 651,044
Principal payments on mortgage
notes payable (314,865)
----------------- ----------------
<PAGE>
BALCOR EQUITY PROPERTIES - XII
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1997 and 1996
(Unaudited)
(Continued)
1997 1996
----------------- ----------------
Net cash used in financing
activities (18,081,284) (10,440,410)
----------------- ----------------
Net change in cash and cash
equivalents (18,003,227) 5,953,953
Cash and cash equivalents at
beginning of period 19,824,096 146,052
----------------- ----------------
Cash and cash equivalents at end
of period $ 1,820,869 $ 6,100,005
================= ================
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:
(a) For financial statement purposes, in previous years partners were allocated
income and loss in accordance with the profit and loss percentages in the
Partnership Agreement. In order for the capital accounts of the General Partner
and Limited Partners to appropriately reflect their respective remaining
economic interests as provided for in the Partnership Agreement, the income
allocation between the partners has been adjusted for financial statement
purposes in 1997.
(b) 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 1997, and all such adjustments are of a normal
and recurring nature.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold all of its remaining properties in 1996. The
Partnership distributed a majority of the proceeds from the property sales in
1996 and 1997. 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. The Partnership has retained a portion
of the proceeds from the sales to satisfy obligations of the Partnership, as
well as establish a reserve for contingencies. Such contingencies may include
legal and other fees and costs stemming from litigation involving the
Partnership, including, but not limited to, the lawsuits discussed in Note 5 of
Notes to Financial Statements. In the absence of any such contingency, the
reserves will be paid within twelve months of the last property sale. In the
event a contingency continues to exist or arises, reserves may be held by the
Partnership for a longer period of time.
3. Interest Expense:
During the nine months ended September 30, 1996, the Partnership incurred and
paid interest expense on mortgage notes payable of $2,129,788.
4. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1997 were:
<PAGE>
Paid
----------------------
Nine Months Quarter Payable
------------ --------- ----------
Reimbursement of expenses to
the General Partner, at cost $28,996 $7,306 $45,640
During 1996, the Partnership repaid the General Partner loan with proceeds from
the sale of the Brierwood Apartments. During the nine months ended September
30, 1996, the Partnership incurred interest expense of $21,152 and paid
interest expense of $24,039 on the loan. Interest expense on the General
Partner loan was computed at the American Express Company cost of funds rate
plus a spread to cover administrative costs. The interest rate was 5.931% at
the date of the loan repayment.
5. Contingencies:
The Partnership is currently involved in two lawsuits whereby the Partnership
and certain affiliates have been named as defendants alleging substantially
similar claims involving certain federal securities law violations with regard
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 defendants continue to vigorously contest
these actions. A plaintiff class has not been certified in either action and,
no determinations of the merits have been made. It is not determinable at this
time whether or not an unfavorable decision in either action would have a
material adverse impact on the financial position, operations and liquidity of
the Partnership. The Partnership believes it has meritorious defenses to
contest the claims.
<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. Prior to 1997, the
Partnership had disposed of all of its properties, including the property in
which the Partnership held a minority joint venture interest.
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 1996 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
The gains relating to the 1996 sales of the Brierwood and Somerset Village
apartment complexes were the primary reasons net income decreased during the
nine months and quarter ended September 30, 1997 as compared to the same
periods in 1996. Further discussion of the Partnership's operations is
summarized below.
1997 Compared to 1996
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1997 and 1996 refer
to both the nine months and quarters ended September 30, 1997 and 1996.
As a result of the 1996 sales of the Brierwood, Cedar Ridge, DeFoors Creek,
Sandridge - Phase I and Somerset Village apartment complexes, rental and
service income, interest expense on mortgage notes payable, depreciation,
amortization of deferred expenses and property management fees ceased during
1996.
Due to higher average cash balances resulting from the investment of net
proceeds received in connection with the 1996 property sales prior to
distribution to Limited Partners, interest income on short-term investments
increased during 1997 as compared to 1996.
The Partnership recognized other income during 1997 in connection with a refund
of a prior year insurance premium relating to the Partnership's properties.
During 1996, the Partnership incurred interest expense on short-term loan -
affiliate. The loan was repaid with proceeds from the sale of the Brierwood
Apartments and interest expense on short-term loan - affiliate ceased during
1996.
<PAGE>
As a result of the 1996 property sales, property operating expense decreased
during 1997 as compared to 1996. During 1997, the Partnership paid expenses
related to the properties sold in 1996.
As a result of the 1996 property sales, real estate tax expense decreased
during 1997 as compared to 1996. During 1997, the Partnership paid additional
real estate taxes as a result of an increase in the assessed value of the
DeFoors Creek Apartments, which was sold in December 1996.
Decreased accounting, portfolio management and legal fees in 1997 resulted in a
decrease in administrative expenses during 1997 as compared to 1996.
The Partnership sold the Brierwood and Somerset Village apartment complexes in
August and September 1996, respectively. As a result, the Partnership
recognized gain on sales of properties of $8,142,528 during 1996.
In connection with the 1996 sales of the Brierwood and Somerset Village
apartment complexes, the Partnership wrote off the remaining unamortized
deferred expenses in the amount of $208,744. This amount was recognized as an
extraordinary item and classified as debt extinguishment expense during the
third quarter of 1996.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership as of September 30, 1997 decreased by
approximately $18,003,000 as compared to December 31, 1996 primarily due to
special distributions made in January and April 1997 to the Limited Partners
from proceeds received in connection with the 1996 property sales. Cash of
approximately $78,000 was provided by operating activities consisting of
interest income on short-term investments and the collection of accounts
receivable relating to escrow and insurance refunds which were partially offset
by the payment of expenses related to the properties sold in 1996 and
administrative expenses. Cash used in financing activities consisted of the
payment of distributions to the Limited Partners of approximately $18,081,000.
The Partnership sold all of its remaining properties during 1996. A majority of
the proceeds from the property sales was distributed to the Limited Partners in
1996 and 1997. 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. The Partnership has retained a portion
of the cash to satisfy obligations of the Partnership as well as establish a
reserve for contingencies. Such contingencies may include legal and other fees
and costs stemming from litigation involving the Partnership including, but not
limited to, the lawsuits discussed in Note 5 of Notes to Financial Statements.
In the absence of any contingency, the reserves will be paid within twelve
months of the last property sale. In the event a contingency continues to exist
or arises, reserves may be held by the Partnership for a longer period of time.
To date, investors have received distributions of Net Cash Receipts of $70 and
Net Cash Proceeds of $558.35, totaling $628.35 per $1,000 Interest, as well as
certain tax benefits. Since all of the Partnership's properties have been sold,
no additional quarterly distributions are expected. Investors will not recover
all of their original investment.
<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 September 30, 1992 (Commission File No. 0-11126) are hereby
incorporated herein by reference.
(10) Material Contracts:
(a) Agreement of Sale relating to the sale of Somerset Village Apartments,
Tempe, Arizona, previously filed as Exhibit 10 to the Registrant's Current
Report on Form 10-Q for the quarter ended June 30, 1996, is incorporated herein
by reference.
(b)(i) Agreement of Sale and attachment thereto relating to the sale of
Sandridge Apartments - Phase I, Pasadena, Texas, previously filed as Exhibit
2(a) to the Registrant's Current Report on Form 8-K dated August 27, 1996, is
incorporated herein by reference.
(ii) Modification Agreement relating to the sale of Sandridge Apartments -
Phase I, Pasadena, Texas, previously filed as Exhibit 2(b) to the Registrant's
Current Report on Form 8-K dated August 27, 1996, is incorporated herein by
reference.
(iii) Second Modification Agreement relating to the sale of Sandridge
Apartments - Phase I, Pasadena, Texas, previously filed as Exhibit (99) to the
Registrant's Current Report on Form 8-K dated September 25, 1996, is
incorporated herein by reference.
(iv) Letter Agreement relating to the sale of Sandridge Apartments - Phase I,
Pasadena, Texas, previously filed as Exhibit (c)(ii) to the Registrant's
Current Report on Form 10-Q for the quarter ended September 30, 1996, is
incorporated herein by reference.
(c)(i) Agreement of Sale and attachment thereto relating to the sale of DeFoors
Creek Apartments, Atlanta, Georgia, previously filed as Exhibit 2 to the
Registrant's Current Report on Form 8-K dated September 9 1996, is incorporated
herein by reference.
(ii) Letter dated October 2, 1996 relating to the termination of the contract
for the sale of DeFoors Creek Apartments, Atlanta, Georgia, previously filed as
Exhibit (10)(c)(ii) to the Registrant's Current Report on Form 10-Q for the
quarter ended September 30, 1996, is incorporated herein by reference.
<PAGE>
(iii) First Amendment to Agreement of Sale and Escrow Agreement dated October
10, 1996 reinstating the contract for the sale of DeFoors Creek Apartments,
Atlanta, Georgia, previously filed as Exhibit (10)(c)(iii) to the Registrant's
Current Report on Form 10-Q for the quarter ended September 30, 1996, is
incorporated herein by reference.
(iv) Second Amendment to Agreement of Sale and Escrow Agreement dated October
17, 1996 relating to the sale of DeFoors Creek Apartments, Atlanta, Georgia,
previously filed as Exhibit (10)(c)(iv) to the Registrant's Current Report on
Form 10-Q for the quarter ended September 30, 1996, is incorporated herein by
reference.
(v) Letter dated October 23, 1996 relating to the termination of the contract
for the sale of DeFoors Creek Apartments, Atlanta, Georgia, previously filed as
Exhibit (10)(c)(v) to the Registrant's Current Report on Form 10-Q for the
quarter ended September 30, 1996, is incorporated herein by reference.
(vi) Third Amendment of Agreement of Sale and Escrow Agreement dated October
31, 1996 reinstating the contract for the sale of DeFoors Creek Apartments,
Atlanta, Georgia, previously filed as Exhibit (10)(c)(vi) to the Registrant's
Current Report on Form 10-Q for the quarter ended September 30, 1996, is
incorporated herein by reference.
(d)(i) Agreement of Sale and attachment thereto relating to the sale of Cedar
Ridge Apartments, Baytown, Texas, previously filed as Exhibit 2(i) to the
Registrant's Current Report on Form 8-K dated September 25, 1996, is
incorporated herein by reference.
(ii) Letter Agreement relating to the sale of Cedar Ridge Apartments, Baytown,
Texas, previously filed as Exhibit 2(ii) to the Registrant's Current Report on
Form 8-K dated September 25, 1996, is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine months ending
September 30, 1997 is incorporated herein by reference.
(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter
ended September 30, 1997.
<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/Jayne A. Kosik
------------------------------
Jayne A. Kosik
Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Partners - XII, the General Partner
Date: October 30, 1997
-----------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1821
<SECURITIES> 0
<RECEIVABLES> 8
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1829
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1829
<CURRENT-LIABILITIES> 54
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1775
<TOTAL-LIABILITY-AND-EQUITY> 1829
<SALES> 0
<TOTAL-REVENUES> 258
<CGS> 0
<TOTAL-COSTS> 117
<OTHER-EXPENSES> 135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6
<INCOME-TAX> 0
<INCOME-CONTINUING> 6
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
