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
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1999
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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
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(Exact name of registrant as specified in its charter)
Illinois 36-3169763
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 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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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
June 30, 1999 and December 31, 1998
(Unaudited)
ASSETS
1999 1998
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Cash and cash equivalents $ 1,395,896 $ 1,407,779
Accrued interest receivable 5,294 5,985
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$ 1,401,190 $ 1,413,764
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 34,535 $ 54,683
Due to affiliates 17,825 18,437
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Total liabilities 52,360 73,120
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Commitments and contingencies
Limited Partners' capital (37,447
Interests issued and outstanding) 1,403,242 1,395,056
General Partner's deficit (54,412) (54,412)
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Total partners' capital 1,348,830 1,340,644
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$ 1,401,190 $ 1,413,764
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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 six months ended June 30, 1999 and 1998
(Unaudited)
1999 1998
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Income:
Interest on short-term investments $ 32,681 $ 40,185
Other income 26,041
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Total income 58,722 40,185
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Expenses:
Administrative 50,536 90,343
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Total expenses 50,536 90,343
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Net income (loss) $ 8,186 $ (50,158)
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Net income (loss) allocated to General
Partner None $ (12,412)
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Net income (loss) allocated to Limited
Partners $ 8,186 $ (37,746)
============== ==============
Net income (loss) per Limited Partnership
Interest (37,447 issued and outstanding)
- Basic and Diluted $ 0.22 $ (1.01)
============== ==============
Distribution to Limited Partners None $ 309,889
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Distribution per Limited Partnership
Interest None $ 8.28
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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 June 30, 1999 and 1998
(Unaudited)
1999 1998
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Income:
Interest on short-term investments $ 16,089 $ 19,670
Other income 26,041
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Total income 42,130 19,670
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Expenses:
Administrative 24,292 35,216
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Total expenses 24,292 35,216
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Net income (loss) $ 17,838 $ (15,546)
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Net income (loss) allocated to General
Partner None None
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Net income (loss) allocated to Limited
Partners $ 17,838 $ (15,546)
============== ==============
Net income (loss) per Limited Partnership
Interest (37,447 issued and outstanding)
-Basic and Diluted $ 0.48 $ (0.42)
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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 six months ended June 30, 1999 and 1998
(Unaudited)
1999 1998
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Operating activities:
Net income (loss) $ 8,186 $ (50,158)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Net change in:
Accounts and accrued interest
receivable 691 20,125
Accounts payable (20,148) 7,064
Due to affiliates (612) 8,493
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Net cash used in operating activities (11,883) (14,476)
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Financing activity:
Distribution to Limited Partners (309,889)
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Cash used in financing activity (309,889)
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Net change in cash and cash equivalents (11,883) (324,365)
Cash and cash equivalents at beginning
of period 1,407,779 1,801,748
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Cash and cash equivalents at end of period $ 1,395,896 $ 1,477,383
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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 Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the six months and quarter
ended June 30, 1999, 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 its final real estate investment in December
1996. 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
the 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 lawsuits discussed in Note 5 of
Notes to the Financial Statements. Due to this litigation, the Partnership will
not be dissolved and the reserves will be held by the Partnership until the
conclusion of all contingencies. There can be no assurances as to the time
frame for the conclusion of these contingencies.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1999 are:
Paid
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Six Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $ 18,567 $ 9,157 $ 17,825
4. Other Income:
During the quarter ended June 30, 1999, the Partnership received a partial
refund of a prior year's real estate taxes on the DeFoors Creek Apartments.
This amount has been recognized as other income for financial statement
purposes.
5. Contingencies:
(a) The Partnership is currently involved in a lawsuit, Masri vs. Lehman
Brothers, Inc., et al., whereby the Partnership and certain affiliates have
been named as defendants alleging 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 defendants continue to
vigorously contest this action. A plaintiff class has not been certified in
this action. No determinations upon any significant issues have been made. 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 against the Partnership, Madison
Partnership Liquidity Investors XX, et al. vs. The Balcor Company, et al.
whereby the Partnership 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. The defendants intend to vigorously contest this action. The
Partnership believes that it has meritorious defenses to contest the claims. It
is not determinable at this time how the outcome of this action will impact the
remaining cash reserves of the Partnership.
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. As of June 30, 1999, the
Partnership has no properties remaining in its portfolio.
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 1998 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The operations of the Partnership in 1999 and 1998 consisted primarily of
administrative expenses which were partially offset by interest income earned
on short-term investments. In addition, during the quarter ended June 30, 1999,
the Partnership received a partial real estate tax refund relating to the
DeFoors Creek Apartments. As a result of this refund and lower administrative
expenses in 1999, the Partnership recognized net income during the six months
and quarter ended June 30, 1999 as compared to a net loss during the same
periods in 1998. Further discussion of the Partnership's operations is
summarized below.
1999 Compared to 1998
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Unless otherwise noted, discussions of fluctuations between 1999 and 1998 refer
to both the six months and quarters ended June 30, 1999 and 1998.
As a result of lower interest rates in 1999 and higher cash balances prior to a
distribution to Limited Partners in January 1998, interest income on short-term
investments decreased during 1999 as compared to 1998.
During the quarter ended June 30, 1999, the Partnership received a partial
refund of a prior year's real estate taxes on the DeFoors Creek Apartments.
This amount has been recognized as other income for financial statement
purposes.
Primarily due to a decrease in legal fees, administrative expenses decreased
during 1999 as compared to 1998.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $12,000 as of
June 30, 1999 as compared to December 31, 1998 primarily 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 and the
receipt of a partial real estate tax refund related to the DeFoors Creek
Apartments.
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 its final real estate investment in December
1996. 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
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. Due to this litigation, the Partnership will not
be dissolved and the reserves will be held by the Partnership until the
conclusion of all contingencies. There can be no assurances as to the time
frame for the conclusion of these contingencies.
Limited Partners have received cumulative distributions of $636.63 per $1,000
Interest, as well as certain tax benefits. Of this amount, $70.00 has been from
Net Cash Receipts and $566.63 has been from Net Cash Proceeds. 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 sold all of its remaining real property investments in 1996 and
distributed a majority of the proceeds from these sales to Limited Partners in
1997. Since the Partnership no longer has any operating assets, the number of
computer systems and programs necessary to operate the Partnership has been
significantly reduced. The Partnership relies on third party vendors to perform
most of its functions and has implemented a plan to determine the Year 2000
compliance status of these key vendors. The Partnership is within its timeline
for having these plans completed prior to the year 2000.
The Partnership's plan to determine the Year 2000 compliance status of its key
vendors involves soliciting information from these vendors through the use of
surveys, follow-up discussions and review of data where needed. The Partnership
has received the surveys from these vendors. While the Partnership cannot
guarantee Year 2000 compliance by its key vendors, and in many cases will be
relying on statements from these vendors without independent verification,
these surveys and discussions with the key vendors performing services for the
Partnership indicate that the key vendors are substantially Year 2000 compliant
as of June 30, 1999. The Partnership will continue to monitor the Year 2000
compliance of its key vendors during the third quarter of 1999. In addition,
the Partnership has developed a contingency plan in the event of non-compliance
by these key vendors in the Year 2000 which will be updated by September 30,
1999 based on the results of further surveys, discussions and testing of
systems, where applicable. The Partnership does not believe that failure by any
of its key vendors to be Year 2000 compliant by the year 2000 would have a
material effect on the business, financial position or results of operations of
the Partnership.
BALCOR EQUITY PROPERTIES-XII
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Madison Partnership Liquidity Investors XX, et al. vs. The Balcor
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Company, et al.
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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. 99CH08972). The Partnership, twenty-one additional
limited partnerships which were sponsored by The Balcor Company (together with
the Partnership, the "Affiliated Partnerships"), The Balcor Company, other
affiliated entities and one individual are named defendants in this action.
Plaintiffs are entities that initiated tender offers to purchase units and, in
fact, purchased units in eleven of the Affiliated Partnerships. The complaint
alleges breach of fiduciary duties and breach of contract under the partnership
agreements for each of the Affiliated Partnerships. The complaint seeks 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 complaint also seeks compensatory damages, punitive
and exemplary damages, and costs and expenses in pursuing the litigation. On
July 14, 1999, the defendants filed a Motion to Dismiss the complaint. A
briefing schedule on this motion has not yet been set.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Partnership believes it has meritorious defenses
to contest the claims. It is not determinable at this time how the outcome of
this action will impact the remaining cash reserves of the Partnership.
Item 6. Exhibits and Reports on Form 8-K
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(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 six months ending June
30, 1999 is attached hereto.
(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter
ended June 30, 1999.
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
Senior Managing Director and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Partners - XII, the
General Partner
Date: August 10, 1999
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