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 0-11805
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BALCOR REALTY INVESTORS-83
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(Exact name of registrant as specified in its charter)
Illinois 36-3189175
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Rd., 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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Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(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-83 (the "Registrant") is a limited partnership formed
in 1981 under the laws of the State of Illinois. The Registrant raised
$75,005,000 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 eleven real
property investments and a minority joint venture interest in an additional
property 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 August 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 and Masri lawsuits
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-XIII, 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.
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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 representing the plaintiffs in each
of the Lenore Klein case (now dismissed) and Raymond Masri case (see below).
The Bruss complaint raises largely the same issues as those raised in the
Lenore Klein and the Raymond Masri cases.
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 Partner-
ships. The complaint seeks judgement 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.
Raymond Masri vs. Lehman Brothers, Inc., et al.
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On February 29, 1996, a proposed class action complaint was filed, Raymond
Masri vs. Lehman Brothers, Inc., et al., Case No. 96/103727 (Supreme Court of
the State of New York, County of New York). The Partnership, twelve additional
limited partnerships which were sponsored by The Balcor Company, three limited
partnerships sponsored by the predecessor of Lehman Brothers, Inc., (together
with the Partnership, the "Defendant Partnerships"), Lehman Brothers, Inc. and
Smith Barney, Inc. are defendants. The complaint alleges, among other things,
common law fraud and deceit, negligent misrepresentation and breach of
fiduciary duty relating to the disclosure of information in the offering of
limited partnership interests in the Defendant Partnerships. The complaint
seeks judgment for compensatory damages equal to the amount invested in the
Defendant Partnerships by the proposed class plus interest accrued thereon;
general damages for injuries arising from the defendants' alleged actions;
recovery from the defendants of all profits received by them as a result of
their alleged actions relating to the Defendant Partnerships; exemplary
damages; attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. Management of each of the defendants believes they
have meritorious defenses to contest the claims.
No activity occurred on this matter during 1999. Plaintiffs' counsel also
represents the plaintiffs in the Dorothy Bruss matter, which is based on the
same set of facts. Raymond Masri is named as an additional plaintiff in the
Dorothy Bruss matter.
Madison Partnership Liquidity Investors XX, et al. vs. The Balcor Company, et
- -----------------------------------------------------------------------------
al.
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Sandra Dee vs. The Balcor 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. 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
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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 Conditions 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 6,370.
Item 6. Selected Financial Data
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Year ended December 31,
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1999 1998 1997 1996 1995
----------- ----------- ----------- ------------ ----------
Total income $89,451 $103,610 $1,586,170 $13,199,107 $15,442,492
(Loss) income
before gain
on sales of
properties and
extraordinary
items (73,680) (129,164) (270,634) 1,335,402 734,890
Net (loss) income (73,680) (129,164) 27,125,351 11,374,454 3,387,955
Net (loss) income
per Limited Part-
nership Interest-
Basic and Diluted (0.98) (1.72) 324.25 144.07 42.91
Total assets 1,769,398 1,805,553 2,173,714 32,876,002 42,023,971
Mortgage notes
payable None None None 33,955,105 46,407,211
Distributions per
Limited Partner-
ship Interest (A) None 3.45 303.02 105.50 85.00
(A) These amounts include distributions of Original Capital of $3.45, $297.02,
$77.00 and $67.00 per Limited Partnership Interest for 1998, 1997, 1996 and
1995, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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Operations
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Summary of Operations
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The operations of Balcor Realty Investors Ltd.-83 (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 five
remaining properties in 1997 and recognized gains in connection with the sales.
As a result of the gains recogized in connection with the 1997 property sales,
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 in 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 property operating expenses related
principally to Deer Oak Apartments, which was sold in 1997.
Primarily due to a decrease in accounting and accrued legal fees,
administrative expenses decreased during 1999 as compared to 1998.
1998 Compared to 1997
- ---------------------
The Partnership sold the Eagle Crest - Phase I, Springs Pointe Village, Walnut
Ridge - Phases I and II and Deer Oaks apartment complexes during 1997 and
recognized gains totaling $28,828,617 in connection with the property sales. As
a result of these sales, rental and service income, interest expense on
mortgage notes payable, depreciation, amortization, real estate taxes and
property management fees ceased during 1997.
Higher average cash balances were available for investment in 1997 due to
proceeds received in connection with the 1997 property sales prior to
distributions to Limited Partners in April 1997 and January 1998. As a result,
interest income on short-term investments decreased during 1998 as compared to
1997.
The Partnership recognized other income in 1997 primarily as a result of
partial refunds received for prior years' insurance premiums related to the
Partnership's properties sold in 1996.
Property operating expense decreased during 1998 as compared to 1997 due to the
sales of the Partnership's five remaining properties in 1997.
Primarily due to lower accounting, data processing, portfolio management and
bank fees, administrative expenses decreased during 1998 as compared to 1997.
This decrease was partially offset by an increase in accrued legal fees in
connection with the class action litigation.
During 1997, the Partnership wrote-off the remaining unamortized deferred
expenses in connection with the sales of the Eagle Crest - Phase I, Walnut
Ridge - Phases I and II and Deer Oaks apartment complexes totaling $327,266 and
paid prepayment penalties in connection with the sales of these properties
totaling $1,105,366. These amounts were recognized as debt extinguishment
expenses and classified as an extraordinary item for financial statement
purposes.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $39,000 as of
December 31, 1999 as 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 August 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
and Masri lawsuits 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 in 1998 and 1997 totaling $3.45 and $303.02
per Limited Partnership Interest, respectively. No distributions were made in
1999. See Statements of Partners' Capital (Deficit) for additional information.
Distributions were comprised of $3.45 of Net Cash Proceeds in 1998 and $6.00 of
Net Cash Receipts and $297.02 of Net Cash Proceeds in 1997.
Limited Partners have received distributions totaling $649.97 per $1,000
Interest, as well as certain tax benefits. Of this amount, $105.50 represents
Net Cash Receipts and $544.47 represents 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 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
- ---------------------------------------------------
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 $1,769,398 $10,108,593 $1,805,553 $10,145,642
Partners' capital
(deficit) accounts:
General Partner (104,991) (102,377) (104,991) (102,377)
Limited Partners 1,753,712 10,090,308 1,827,392 10,164,882
Net (loss) income:
General Partner None None None 2,614
Limited Partners (73,680) (74,574) (129,164) (142,729)
Per Limited Part-
nership Interest (0.98)(A) (0.99) (1.72)(A) (1.90)
(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
- --------------------
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-XIII, its General Partner, has a
Board of Directors.
(b, c & e) The names, ages and business experiences 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
information relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) The following entity is the sole Limited Partner which owns beneficially
more then 5% of the outstanding Limited Partnership Interests of the
Registrant:
Name and Amount and
Address of Nature of
Beneficial Beneficial
Titled of Class Owner Ownership Percent of Class
--------------- ----------- ----------- -----------------
Limited WIG 83 5,753.08 7.67%
Partnership Partners Limited
Interests Chicago, Partnership
Illinois Interests
Limited Metropolitan 3,334.70 4.45%
Partnership Acquisition VII Limited
Interests Greenville, Partnership
South Carolina Interests
While Metropolitan Acquisition VII owns less than 5% of the Interests, for
purposes of this Item 12, Metropolitan Acquisition VII is an affiliate of WIG
83 Partners and, collectively, they own 12.12% of the Interests.
(b) Balcor Partners-XIII and its officers and partners own as a group the
following Limited Partnership Interests in the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership 99 Interests Less than 1%
Interests
Relatives of the officers and affiliates of the partners of the General Partner
do not own any additional Interests.
In addition, Balcor LP Corp., an affiliate of the General Partner, holds title
to 88 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 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 Schedules, and Reports on Form 8-K
- ------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements and Financial Statement Schedule in
this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement of Limited Partnership set forth as
Exhibit 3 to Amendment No. 1 to the Registrant's Registration Statement on Form
S-11 dated December 10, 1982 (Registration No. 2-79043) is incorporated herein
by reference.
(4) Amended and Restated 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 10, 1982 (Registration No. 2-79043) 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-83
By: /s/Jayne A. Kosik
------------------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial Officer)
of Balcor Partners-XIII, 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-XIII,
the General Partner
/s/Thomas E. Meador March 28, 2000
- -------------------- --------------
Thomas E. Meador
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial Officer)
of Balcor Partners-XIII, 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-83:
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-83 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-83
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
1999 1998
------------ -------------
Cash and cash equivalents $ 1,760,820 $ 1,799,451
Accounts and accrued interest receivable 8,578 6,102
------------ -------------
$ 1,769,398 $ 1,805,553
============ =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 86,965 $ 59,606
Due to affiliates 33,712 23,546
------------ -------------
Total liabilities 120,677 83,152
------------ -------------
Commitments and contingencies
Limited Partners' capital (75,005
Interests issued and outstanding) 1,753,712 1,827,392
General Partner's deficit (104,991) (104,991)
------------ -------------
Total partners' capital 1,648,721 1,722,401
------------ -------------
$ 1,769,398 $ 1,805,553
============ =============
The accompanying notes are an integral part of the financial statement
BALCOR REALTY INVESTORS-83
(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 $ (2,286,997) $(2,910,234) $ 623,237
Cash distributions to
Limited Partners (A) (22,728,015) (22,728,015)
Net income for the year
ended December 31, 1997 27,125,351 2,805,243 24,320,108
------------- ------------ -------------
Balance at December 31, 1997 2,110,339 (104,991) 2,215,330
Cash distribution to
Limited Partners (A) (258,774) (258,774)
Net loss for the year
ended December 31, 1998 (129,164) (129,164)
------------- ------------ -------------
Balance at December 31, 1998 1,722,401 (104,991) 1,827,392
Net loss for the year
ended December 31, 1999 (73,680) (73,680)
------------- ------------ -------------
Balance at December 31, 1999 $ 1,648,721 $ (104,991) $ 1,753,712
============= ============ =============
(A) Summary of cash distributions per Interest:
1999 1998 1997
------------- ------------ -------------
First Quarter None $ 3.45 $ 41.00
Second Quarter None None 230.15
Third Quarter None None None
Fourth Quarter None None 31.87
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83
(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 $ 1,159,961
Interest on short-term
investments $ 89,451 $ 103,610 388,775
Other 37,434
------------- ----------- ------------
89,451 103,610 1,586,170
Total income ------------- ----------- ------------
Expenses:
Interest on mortgage
notes payable 390,626
Depreciation 145,762
Amortization of deferred
expenses 14,561
Property operating 13,457 768,504
Real estate taxes 140,715
Property management fees 65,844
Administrative 163,131 219,317 330,792
------------- ----------- ------------
Total expenses 163,131 232,774 1,856,804
------------- ----------- ------------
Loss before gain on sales
of properties and
extraordinary item (73,680) (129,164) (270,634)
Gain on sales of properties 28,828,617
------------- ----------- ------------
(Loss) income before
extraordinary item (73,680) (129,164) 28,557,983
Extraordinary item:
Debt extinguishment expenses (1,432,632)
------------- ----------- ------------
Net (loss) income $ (73,680) $ (129,164) $ 27,125,351
============= =========== ============
The accompanying notes are an integral part of the financial statements
BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1999, 1998 and 1997
(Continued)
1999 1998 1997
------------- ----------- ------------
(Loss) income before
extraordinary item allocated
to General Partner None None $ 2,953,403
============= =========== ============
(Loss) income before
extraordinary item
allocated to Limited
Partners $ (73,680) $ (129,164) $ 25,604,580
============= =========== ============
(Loss) income before
extraordinary item per Limited
Partnership Interest (75,005
issued and outstanding)-
Basic and Diluted $ (0.98) $ (1.72) $ 341.37
============= =========== ============
Extraordinary item
allocated to General
Partner None None $ (148,160)
============= =========== ============
Extraordinary item
allocated to Limited
Partners None None $ (1,284,472)
============= =========== ============
Extraordinary item per
Limited Partnership
Interest (75,005 issued
and outstanding) - Basic
and Diluted None None $ (17.12)
============= =========== ============
Net (loss) income allocated
to General Partner None None $ 2,805,243
============= =========== ============
Net (loss) income allocated
to Limited Partners $ (73,680) $ (129,164) $ 24,320,108
============= =========== ============
Net (loss) income per Limited
Partnership Interest (75,005
issued and outstanding)-
Basic and Diluted $ (0.98) $ (1.72) $ 324.25
============= =========== ============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83
(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 $ (73,680) $ (129,164) $ 27,125,351
Adjustments to reconcile
net (loss) income to net cash
used in operating activities:
Debt extinguishment
expenses 327,266
Gain on sales of
properties (28,828,617)
Depreciation of
properties 145,762
Amortization of deferred
expenses 14,561
Net change in:
Escrow deposits 1,398,303
Accounts receivable (2,476) 14,396 49,107
Prepaid expenses 116,589
Accounts payable 27,359 34,525 (59,587)
Due to affiliates 10,166 (14,748) (72,927)
Accrued liabilities (775,260)
Security deposits (236,745)
------------- ----------- ------------
Net cash used in
operating activities (38,631) (94,991) (796,197)
------------- ----------- ------------
Investing activities:
Proceeds from sales of
properties 56,099,667
Payment of selling costs (1,415,286)
------------
Net cash provided by
investing activities 54,684,381
------------
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
(Continued)
1999 1998 1997
------------- ----------- ------------
Financing activities:
Distributions to Limited
Partners $ (258,774) $(22,728,015)
Repayment of mortgage
note payable-affiliate (734,154)
Repayment of mortgage
notes payable (33,191,739)
Principal payments on
mortgage notes payable (29,212)
----------- ------------
Cash used in financing
activities (258,774) (56,683,120)
----------- ------------
Net change in cash and cash
equivalents $ (38,631) (353,765) (2,794,936)
Cash and cash equivalents
at beginning of year 1,799,451 2,153,216 4,948,152
------------- ----------- ------------
Cash and cash equivalents
at end of year $ 1,760,820 $ 1,799,451 $ 2,153,216
============= =========== ============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-83
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Partnership's Business:
Balcor Realty Investors - 83 (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 August 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
and Masri lawsuits discussed in Note 12 of Notes to the 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
reported 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.
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 loan modification and refinancing fees which
were amortized over the terms of the respective agreements. Upon sale, any
remaining unamortized balance was recognized as debt extinguishment expense and
classified as an extraordinary item.
(e) 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.
(f) 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.
(g) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles.
(h) Cash and cash equivalents include all highly liquid investments with an
original maturity of three months or less. Cash is held or invested primarily
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.
The Partnership has no dilutive securities.
4. Partnership Agreement:
The Partnership was organized in December 1981; however, operations did not
commence until February 1983. The Partnership Agreement provides for Balcor
Partners-XIII to be the General Partner and for the admission of Limited
Partners through the sale of up to 75,005 Limited Partnership Interests at
$1,000 per Interest, all of which were sold as of March 28, 1983, the
termination date of the offering.
The Partnership Agreement generally provides that the General Partner will be
allocated 5% of the operating profits and losses and 1% of capital losses and
the greater of 1% of capital profits or an amount equal to Net Cash Proceeds
distributed to the General Partner. 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.
One hundred percent of Net Cash Receipts available for distribution was
distributed to the holders of Interests in proportion to their participating
percentages as of the record date for such distributions. Under certain
circumstances, the General Partner would have participated in the Net Cash
Proceeds of the sale or refinancing of the Partnership's 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 Notes Payable:
During 1997, the Partnership incurred and paid interest expense on
mortgage notes payable to non-affiliates of $383,988.
6. Management Agreements:
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.
7. Sellers' Participation in Joint Ventures:
The Eagle Crest - Phase I and Deer Oaks apartment complexes were owned by joint
ventures between the Partnership and the respective sellers. Consequently, the
sellers retained an interest in each property through their interest in each
joint venture. All assets, liabilities, income and expenses of the joint
ventures were included in the financial statements of the Partnership with the
appropriate deduction from income, if any, for the sellers' participation in
the joint ventures. The Eagle Crest - Phase I and Deer Oaks apartment complexes
were sold in January and August 1997, respectively. The sellers did not
recognize any income or receive any proceeds from the sales of these properties
pursuant to the joint venture agreements.
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. For 1999, the net effect of these accounting differences
is that the net loss in the financial statements is $894 less than the tax loss
of the Partnership 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 $7,555 $7,399 $4,608 $33,848 $8,523
Data processing 4,798 7,398 3,576 872 4,871 None
Legal 3,041 4,451 5,127 3,316 20,577 5,390
Portfolio management 11,690 14,308 23,599 14,750 78,912 20,006
Other None None 6,721 None 6,721 4,375
As of December 31, 1996, the Partnership had an unsecured loan from The Balcor
Company ("TBC"), an affiliate of the General Partner, relating to the Walnut
Ridge Phase II Apartments in the amount of $734,154. In February 1997, the
Partnership repaid the loan with proceeds received from the sale of the
property. During 1997, the Partnership incurred interest expense on the TBC
loan of $6,638 and paid interest expense of $13,276.
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:
(a) Deer Oaks Apartments was owned by a joint venture between the Partnership
and seller. In August 1997, the joint venture sold the property in an all cash
sale for $7,250,000. From the proceeds of the sale, the Partnership paid
$4,701,161 to the third party mortgage holder in full satisfaction of the first
mortgage loan and $194,408 in selling costs. The basis of the property was
$3,067,073 which is net of accumulated depreciation of $2,669,261. For
financial statement purposes, the Partnership recognized a gain of $3,988,519
from the sale of this property, and the joint venture partner was not allocated
any of the gain. The Partnership received all net proceeds from the sale.
(b) Eagle Crest - Phase I Apartments was owned by a joint venture between the
Partnership and seller. In January 1997, the joint venture sold the property in
an all cash sale for $9,508,000. From the proceeds of the sale, the Partnership
paid $7,093,430 to the third party mortgage holder in full satisfaction of the
first mortgage loan, $357,702 in selling costs and $675,281 of prepayment
penalties. The basis of the property was $5,340,277 which is net of accumulated
depreciation of $4,172,793. For financial statement purposes, the Partnership
recognized a gain of $3,810,021 from the sale of this property, and the joint
venture partner was not allocated any of the gain. The Partnership received all
net proceeds from the sale.
(c) In January 1997, the Partnership sold the Walnut Ridge - Phases I and II
apartment complexes in an all cash sale for $19,475,000. The purchaser received
a $300,000 credit against the purchase price for certain repairs at the
properties. From the proceeds of the sale, the Partnership paid $10,752,114 to
the third party mortgage holder in full satisfaction of the first mortgage
loans, repaid a $740,792 loan including accrued interest from TBC, paid
$470,165 in selling costs and $430,085 of prepayment penalties. The basis of
the properties was $10,277,246 which is net of accumulated depreciation of
$8,176,330. For financial statement purposes, the Partnership recognized a gain
of $8,427,589 from the sale of these properties.
(d) In January 1997, the Partnership sold the Springs Pointe Village Apartments
in an all cash sale for $20,166,667. From the proceeds of the sale, the
Partnership paid $10,645,034 to the third party mortgage holder in full
satisfaction of the first mortgage loan, and paid $393,011 in selling costs.
The basis of the property was $7,171,168 which is net of accumulated
depreciation of $6,097,437. For financial statement purposes, the Partnership
recognized a gain of $12,602,488 from the sale of this property.
11. Extraordinary Item:
During 1997, the Partnership paid prepayment penalties totaling $1,105,366 in
connection with the sales of the Eagle Crest - Phase I and Walnut Ridge -
Phases I and II apartment complexes and wrote-off the remaining unamortized
deferred expenses totaling $327,266 in connection with the sales of the Springs
Pointe Village, Walnut Ridge - Phases I and II, Eagle Crest - Phase I and Deer
Oaks apartment complexes. These amounts were recognized as debt extinguishment
expenses and classified as an extraordinary item for financial statement
purposes.
12. Contingencies:
(a) The Partnership is currently involved in two related lawsuits, Masri vs.
Lehman Brothers, Inc., et al. and 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 defendants
continue to vigorously contest these actions. A plaintiff class has not been
certified in either action. With respect to the Masri case, no determinations
upon any significant issues have been made. 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 these actions. It is not
determinable at this time how the outcome of either action will impact the
remaining cash reserves of the Partnership. The Partnership believes it has
meritorious defenses to contest the claims.
(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> 1761
<SECURITIES> 0
<RECEIVABLES> 9
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1769
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1769
<CURRENT-LIABILITIES> 121
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1649
<TOTAL-LIABILITY-AND-EQUITY> 1769
<SALES> 0
<TOTAL-REVENUES> 89
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 163
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (74)
<INCOME-TAX> 0
<INCOME-CONTINUING> (74)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74)
<EPS-BASIC> (0.98)
<EPS-DILUTED> (0.98)
</TABLE>
