UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(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, 1994
-----------------
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 0-11803
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BALCOR EQUITY PROPERTIES-XIV
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3236496
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
- - ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
--------------
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 ]
<PAGE>
PART I
Item 1. Business
- - ----------------
Balcor Equity Properties-XIV (the "Registrant") is a limited partnership formed
in 1983 under the laws of the State of Illinois. The Registrant raised
$85,105,000 from sales of Limited Partnership Interests. The Registrant's
operations for the period included in this report consist exclusively of
investment in and operation of real property, and all financial information
included in this report relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire fourteen real
property investments, of which all have been disposed. The Registrant sold the
Oak Ridge, Towne Oaks South, and Belmere Apartments in 1994, which represented
the final three properties owned by the Registrant. (See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations for
additional information.)
Pursuant to the Partnership Agreement, when all interests in real estate are
disposed of, the Registrant will be dissolved. As a result, the General Partner
commenced liquidation of the Registrant. On February 28, 1995 the Registrant
was dissolved, and on March 29, 1995 the Registrant's registration under the
Securities Exchange Act of 1934 was terminated.
The officers, directors and employees of Balcor Equity Partners-XIV, Inc., the
General Partner of the Registrant, and its affiliates perform certain services
for the Registrant. The Registrant has no employees engaged in its operations.
Item 7. Management's Discussion and Analysis of Financial Condition and
- - -----------------------------------------------------------------------
Results of Operations
- - ---------------------
Summary of Operations
- - ---------------------
Balcor Equity Properties - XIV (the "Partnership") recognized significantly
higher income in 1994 than in 1993 as a result of the gains recognized from the
sales of the Partnership's three remaining properties.
The Partnership recognized higher net income in 1992 than in 1993 due to a
property sale, gain from forgiveness of debt and a repayment of a wrap-around
note receivable in 1992. Net income was also recognized in 1993 in connection
with a property sale and a repayment of a wrap-around note receivable. Further
discussion of the Partnership's operations is set forth below.
Operations
- - ----------
1994 Compared to 1993
- - ---------------------
The December 1993 sale of the Village Green Apartments, as well as the sales of
the Oak Ridge and Towne Oaks South apartment complexes in September 1994,
resulted in decreases in rental and service income, interest expense on
mortgage notes payable, depreciation expense, amortization of deferred
expenses, property operating expense, maintenance and repairs, real estate tax
expense and property management fees for 1994 as compared to 1993.
Interest income on short-term investments increased during 1994 as compared to
1993 primarily as a result of higher average interest rates and higher average
cash balances as a result of the sales proceeds received from the sales of the
Oak Ridge and Towne Oaks South apartment complexes.
During December 1993, the purchaser of the Camelot Villas mobile home community
<PAGE>
repaid the wrap-around note receivable collateralized by the property. The
repayment caused interest income on wrap-around and promissory notes receivable
to cease in 1993 and contributed to the decrease in interest expense on
mortgage notes payable during 1994 as compared to 1993.
The December 1993 repayment of the General Partner loans caused interest
expense on short-term loans to cease during 1994.
During 1994, the Partnership sold its three remaining properties and recognized
increased gains on sales of properties in 1994 as compared to 1993.
The gain recognized in connection with the sale of the Belmere Apartments
resulted in affiliate's participation in income from joint venture during 1994
as compared to a loss in 1993.
1993 Compared to 1992
- - ---------------------
Increases in the rental rates coupled with stable occupancy levels at the
Belmere, Oak Ridge, Towne Oaks South and Village Green apartment complexes
resulted in an increase in rental income at these properties. However, the
sales of the Countryside Village Apartments during February 1992 and the
Village Green Apartments in December 1993 led to a slight decrease in rental
income for 1993 as compared to 1992.
In September 1992, the purchaser of the American Colony Apartments repaid, at a
discount, the wrap-around note receivable collateralized by the property. The
repayment is the primary reason interest income on wrap-around and promissory
notes receivable and interest expense on mortgage notes payable decreased
during 1993 as compared to 1992.
A repayment of a portion of the General Partner loans in the fourth quarter
1992, as well as declining interest rates, resulted in a decrease in interest
expense on short-term loans during 1993 as compared to 1992.
Maintenance and repairs expense increased during 1993 as compared to 1992 due
to an increase in exterior painting costs and interior improvements at the
Towne Oaks South Apartments. This increase was partially offset by a decrease
in interior improvements at the Village Green Apartments during 1993, as well
as the subsequent sale of Village Green Apartments during the fourth quarter of
1993.
Increases in assessed property valuation and tax rates received from taxing
authorities on the Oak Ridge and Belmere apartment complexes, respectively,
resulted in an increase in real estate tax expense for 1993 as compared to
1992.
Administrative expenses decreased during 1993 as compared to 1992 due to
decreased accounting costs and a decrease in legal fees associated with the
foreclosure of the Riverwood Village Apartments in 1992.
The gain recognized in connection with the sale of the Countryside Village
Apartments in 1992 resulted in a lower affiliates' participation in losses from
joint ventures during 1992 as compared to 1993. During 1992, the affiliate
also participated in an extraordinary gain related to the forgiveness of debt
on the Countryside Village Apartments.
Liquidity and Capital Resources
- - -------------------------------
The cash position of the Partnership increased substantially as of December 31,
1994 as compared to December 31, 1993. The Partnership's cash flow provided by
operating activities was generated primarily from the Partnership's properties,
and was partially offset by the payment of administrative expenses. The cash
flow provided by investing activities consisted of sales proceeds from the sale
of the Oak Ridge, Towne Oaks South and Belmere apartment complexes. These
<PAGE>
proceeds were partially offset by the payment of brokerage commissions and
other selling costs. The net cash flow provided by operating and investing
activities were partially used to fund financing activities consisting
primarily of the repayment of the mortgage debt on the sold properties, as well
as principal payments on mortgage notes payable. Financing activities also
included contributions from the joint venture partner and amounts released to
the Partnership in connection with the restricted escrow accounts on the Towne
Oaks South mortgage note payable.
Pursuant to the Partnership Agreement, when all interests in real estate are
sold or otherwise disposed of, the Partnership will be dissolved. As a
condition of the Belmere Apartments sale, the Partnership was required to
retain $250,000 of the sale proceeds in cash reserves until February 12, 1995.
The Partnership made a final distribution to Limited Partners in February 1995
of $8,129,230 ($95.52 per Interest) representing all remaining cash reserves,
which included a capital contribution from the General Partner. (See Note 7. of
Notes to Financial Statements for additional information.) Subsequently, the
General Partner commenced liquidation of the Partnership. On February 28, 1995
the Partnership was dissolved, and on March 29, 1995 the Partnership's
registration under the Securities Exchange Act of 1934 was terminated. The
General Partner has not received any distribution of Net Cash Receipts or Net
Cash Proceeds from the Partnership.
Over the life of the Partnership, investors have received distributions of Net
Cash Receipts of $19.75 and Net Cash Proceeds of $225.77, totaling $245.52 per
$1,000 Interest, as well as certain tax benefits.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Capital (Deficit), for the years ended December 31,
1994, 1993 and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993
and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1994
Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Equity Properties-XIV:
We have audited the financial statements and the financial statement schedule
of Balcor Equity Properties-XIV (An Illinois Limited Partnership) as listed in
the index of this Form 10-K. These financial statements and the financial
statement schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, the Partnership Agreement
provided for the dissolution of the Partnership upon the sale of all its
interests in real estate. The Partnership has ceased operations and was
dissolved on February 28, 1995.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Equity Properties-XIV
at December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
February 28, 1995
<PAGE>
BALCOR EQUITY PROPERTIES-XIV
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
------------- ------------
Cash and cash equivalents $ 8,429,567 $ 372,021
Escrow deposits 707,045
Accounts and accrued interest
receivable 52,873 2,250
Deferred expenses, net of
accumulated amortization of
$122,237 in 1993 147,787
------------- ------------
8,482,440 1,229,103
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Investment in real estate:
Land 3,063,912
Buildings and improvements 30,162,805
------------
33,226,717
Less accumulated depreciation 14,569,842
------------
Investment in real estate, net
of accumulated depreciation 18,656,875
------------- ------------
$ 8,482,440 $ 19,885,978
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 36,257 $ 43,844
Due to affiliates 59,783 37,537
Due to affiliate - joint
venture partner 482,168
Accrued liabilities, principally
interest and real estate taxes 133,844
Security deposits 93,662
Mortgage notes payable 15,697,080
Mortgage note payable - affiliate 1,600,000
------------- ------------
Total liabilities 578,208 17,605,967
Affiliates' participation
in joint venture (294,131)
Partners' capital (85,105 Limited
Partnership Interests issued
and outstanding) 7,904,232 2,574,142
------------- ------------
$ 8,482,440 $ 19,885,978
============= ============
The accompanying notes are an integral part of the financial statements
<PAGE>
BALCOR EQUITY PROPERTIES-XIV
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1994, 1993 and 1992
Partners' Capital Accounts
--------------------------------------
General Limited
Total Partner Partners
------------- ------------ -----------
Balance at December 31, 1991 $ (2,882,806)$ (657,776)$(2,225,030)
Net income for the year
ended December 31, 1992 2,822,807 28,228 2,794,579
------------- ------------ -----------
Balance at December 31, 1992 (59,999) (629,548) 569,549
Net income for the year
ended December 31, 1993 2,634,141 26,341 2,607,800
------------- ------------ -----------
Balance at December 31, 1993 2,574,142 (603,207) 3,177,349
Net income for the year
ended December 31, 1994 5,330,090 241,484 5,088,606
------------- ------------ -----------
Balance at December 31, 1994 $ 7,904,232 $ (361,723)$ 8,265,955
============= ============ ===========
The accompanying notes are an integral part of the financial statements
<PAGE>
BALCOR EQUITY PROPERTIES-XIV
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------ -----------
Income:
Rental and service $ 3,889,151 $ 6,274,689 $ 6,350,638
Interest on short-term investments 126,397 27,905 19,945
Interest on wrap-around
notes receivable 244,270 730,835
------------- ------------ -----------
Total income 4,015,548 6,546,864 7,101,418
------------- ------------ -----------
Expenses:
Interest on mortgage notes payable 1,494,110 2,486,315 3,171,973
Interest on short-term loans 116,039 215,003
Depreciation 898,728 1,608,943 1,671,232
Amortization of deferred expenses 28,205 52,720 53,685
Property operating 1,275,750 1,681,834 1,789,587
Maintenance and repairs 579,223 874,475 848,029
Real estate taxes 324,798 532,896 498,617
Property management fees 193,334 313,566 317,964
Administrative 396,779 387,180 547,540
------------- ------------ -----------
Total expenses 5,190,927 8,053,968 9,113,630
------------- ------------ -----------
Loss before gains on sales of
properties, affiliates'
participation in (income) losses
from joint ventures and
extraordinary items (1,175,379) (1,507,104) (2,012,212)
Gains on sales of properties 7,260,202 4,064,697 4,169,112
Affiliates' participation in
(income) losses from joint venture (754,733) 76,548 10,563
------------- ------------ -----------
Income before extraordinary items 5,330,090 2,634,141 2,167,463
Extraordinary items
Gain on forgiveness of debt 776,566
Affiliate's participation in gain
on forgiveness of debt (121,222)
-----------
Total extraordinary items 655,344
------------- ------------ -----------
Net income $ 5,330,090 $ 2,634,141 $ 2,822,807
============= ============ ===========
Income before extraordinary items
allocated to General Partner $ 241,484 $ 26,341 $ 21,675
============= ============ ===========
Income before extraordinary items
allocated to Limited Partners $ 5,088,606 $ 2,607,800 $ 2,145,788
============= ============ ===========
Income before extraordinary items
per Limited Partnership Interest
(85,105 issued and outstanding) $ 59.79 $ 30.64 $ 25.21
============= ============ ===========
<PAGE>
Extraordinary items allocated to
General Partner None None $ 6,553
============= ============ ===========
Extraordinary items allocated to
Limited Partners None None $ 648,791
============= ============ ===========
Extraordinary items per Limited
Partnership Interest (85,105
issued and outstanding) None None $ 7.62
============= ============ ===========
Net income allocated to
General Partner $ 241,484 $ 26,341 $ 28,228
============= ============ ===========
Net income allocated to
Limited Partners $ 5,088,606 $ 2,607,800 $ 2,794,579
============= ============ ===========
Net income per Limited Partnership
Interest (85,105 issued
and outstanding) $ 59.79 $ 30.64 $ 32.84
============= ============ ===========
The accompanying notes are an integral part of the financial statements
<PAGE>
BALCOR EQUITY PROPERTIES-XIV
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------ -----------
Operating activities:
Net income $ 5,330,090 $ 2,634,141 $ 2,822,807
Adjustments to reconcile net
income to net cash provided by
or used in operating activities:
Extraordinary items:
Gain on forgiveness of debt (776,566)
Affiliate's participation in
gain on forgiveness of debt 121,222
Recognized gains on sales
of properties (7,260,202) (4,064,697) (4,169,112)
Affiliates' participation in
loss from joint venture 754,733 (76,548) (10,563)
Depreciation of properties 898,728 1,608,943 1,671,232
Amortization of deferred
expenses 28,205 52,720 53,685
Payment of accrued interest
expense (348,405)
Net change in:
Escrow deposits 625,334 (299,445) (42,328)
Accounts and accrued
interest receivable (50,623) 167,273 (23,770)
Accounts payable (7,648) (140,172) (169,801)
Due to affiliates 22,246 (9,727) (68,640)
Accrued liabilities (133,844) 87,317 (282,882)
Security deposits (93,662) (53,771) (41,064)
------------- ------------ -----------
Net cash provided by or used in
operating activities 113,357 (93,966) (1,264,185)
------------- ------------ -----------
Investing activities:
Additions to properties (292,837)
Proceeds from sales of properties 26,000,000 8,100,000 6,050,000
Payment of closing costs relating
to sales of properties (862,070) (243,000)
Proceeds from prepayment of
wrap-around notes receivable 1,651,351 1,438,538
Collection of principal payments
on wrap-around notes receivable 1,000,000 1,250,000
------------- ------------ -----------
Net cash provided by
investing activities 25,137,930 10,508,351 8,445,701
------------- ------------ -----------
Financing activities:
Capital contributions from joint
venture partner - affiliate 21,628 25,514 113,589
Proceeds from loans
payable - affiliate 84,670 315,864
Repayment of loans
payable - affiliate (3,297,704) (2,376,042)
Repayment of mortgage
notes payable (15,638,207) (6,850,000) (4,756,687)
Repayment of mortgage notes
payable - affiliate (1,600,000) (244,204) (944,908)
Principal payments on
mortgage notes payable (58,873) (120,153) (157,168)
Principal payments on mortgage
<PAGE>
notes payable - affiliate (38,170)
Payment of deferred expenses (72,040)
Release of financing escrows 81,711 238,115 562,742
------------- ------------ -----------
Net cash used in financing
activities (17,193,741) (10,163,762) (7,352,820)
------------- ------------ -----------
Net change in cash and
cash equivalents 8,057,546 250,623 (171,304)
Cash and cash equivalents
at beginning of period 372,021 121,398 292,702
------------- ------------ -----------
Cash and cash equivalents
at end of period $ 8,429,567 $ 372,021 $ 121,398
============= ============ ===========
The accompanying notes are an integral part of the financial statements
<PAGE>
BALCOR EQUITY PROPERTIES-XIV
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Partnership Agreement and Termination of Partnership Affairs:
The Partnership was organized on January 31, 1983. The Partnership Agreement
provides for Balcor Equity Partners-XIV, Inc. to be the General Partner and for
the admission of Limited Partners through the sale of up to 100,000 Limited
Partnership Interests at $1,000 per Interest, 85,105 of which were sold on or
prior to October 21, 1983, the termination date of the offering.
The Partnership Agreement provides that the General Partner will be allocated
1% of the profits and losses. One hundred percent of Net Cash Receipts
available for distribution shall be distributed to the holders of Interests. In
addition, there shall be accrued for the benefit of the General Partner as its
distributive share from operations, an amount equivalent to approximately 1% of
the total Net Cash Receipts being distributed which will be paid only out of
Net Cash Proceeds.
Generally, when the Partnership sells or refinances its properties, the Net
Cash Proceeds resulting therefrom, which are available for distribution, will
be distributed only to holders of Interests until they have received an amount
equal to their Original Capital plus certain levels of return, as specified by
the Partnership Agreement. Only after such returns are made to the Limited
Partners will the General Partner receive 20% of remaining Net Cash Proceeds
available for distribution. The General Partner's share of Net Cash Proceeds
will include its accrued distributive share from Net Cash Receipts. There have
been no cash payments made to the General Partner under these provisions.
Pursuant to the Partnership Agreement, when all interests in real estate are
sold or otherwise disposed of, the Partnership will be dissolved. As a
condition of the Belmere Apartments sale, the Partnership was required to
retain $250,000 of the sale proceeds in cash reserves until February 12, 1995.
The Partnership made a final distribution to Limited Partners in February 1995
of $8,129,230 ($95.52 per Interest) representing all remaining cash reserves,
which included a capital contribution from the General Partner. (See Note 7. of
Notes to Financial Statements for additional information.) Subsequently, the
General Partner commenced liquidation of the Partnership, and on February 28,
1995 the Partnership was dissolved. The General Partner has not received any
distribution of Net Cash Receipts or Net Cash Proceeds from the Partnership.
2. Accounting Policies:
(a) As properties were disposed of, 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.
(b) Deferred expenses consisted of loan commitment fees and loan financing fees
which were amortized over the terms of the respective agreements.
(c) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(d) 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.
(e) 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 General
<PAGE>
Partner was allocated additional income in 1994 for financial statement
purposes.
(f) A reclassification has been made to the previously reported 1992 statements
in order to provide comparability with the 1994 and 1993 statements. This
reclassification has not changed the 1992 results.
3. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1993 consisted of the following:
Carrying
Property Amount of
Pledged as Notes at
Collateral 12/31/93
- - -------------- -------------
Mortgage Notes
Payable -
Nonaffiliates:
Apartment
Complexes (A)
- - -------------
Belmere $ 6,315,175
Oak Ridge 2,672,000
Towne Oaks South 6,709,905
----------
Subtotal 15,697,080
Mortgage Notes
Payable -
Affiliate:
Apartment
Complex (A)
- - -----------
Oak Ridge 1,600,000
-----------
Total $17,297,080
===========
(A) During 1994, these properties were sold. (See Note 8 of Notes to Financial
Statements for additional information.)
During the years ended December 31, 1994, 1993 and 1992, the Partnership
incurred interest expense on mortgage notes payable to non-affiliates of
$1,455,794, $2,340,799 and $2,948,858, respectively. The Partnership paid
interest of $1,455,794 in 1994, $2,340,799 in 1993 and $3,018,858 in 1992.
4. Management Agreements:
During 1994, prior to their respective sales, the Oak Ridge and Towne Oaks
South apartment complexes were managed by Allegiance Realty Group, an affiliate
of the General Partner. Belmere Apartments was managed by Allegiance Realty
Group for a portion of the year and by a third-party management company at the
time of sale. All of the management agreements provided for annual fees of 5%
of gross operating receipts.
5. Affiliates' Participation in Joint Ventures:
The Belmere Apartments, which was owned by a joint venture between the
Partnership and an affiliated partnership, was sold in December 1994. Profits
and losses, including the gain on property sale, were allocated 73.62% to the
Partnership and 26.38% to the affiliate. (See Note 8 of Notes to Financial
Statements for additional information.)
<PAGE>
The Countryside Village Apartments, which was owned by a joint venture between
the Partnership and an affiliated partnership, was sold in February 1992.
Profits and losses, including the gain on property sale, were allocated 84.39%
to the Partnership and 15.61% to the affiliate. (See Notes 8 and 9 of Notes to
Financial Statements for additional information.)
6. 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. The net effect of these accounting differences is that
the net income in 1994 in the financial statements is $5,790,297 less than the
taxable income of the Partnership for the same period, including the long-term
capital gains.
7. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Property management fees $207,772 None $319,114 $20,362 $322,165 $25,910
Reimbursement of expenses
to the General Partner,
at cost:
Accounting 54,100 $15,667 35,178 2,931 18,139 1,323
Data processing 32,342 7,681 34,379 8,574 37,001 3,050
Investor communica-
tions 12,501 5,023 9,793 816 8,081 589
Legal 7,464 8,234 13,020 1,085 21,048 1,535
Portfolio management 20,462 2,978 34,661 2,503 29,608 2,159
Property sales
administration (A) 21,996 None None None 3,427 None
Other 17,381 20,200 15,186 1,266 10,206 744
(A) The General Partner elected to forego receipt of real estate commissions
related to 1988 and subsequent property sales; in lieu of these commissions,
the General Partner is reimbursed by the Partnership for actual expenses
incurred in connection with property sales activities.
Since the Limited Partners did not receive distributions in an amount equal to
their Original Capital contribution, the General Partner was required to make a
final contribution of $363,104 in February 1995 to the Partnership, in
accordance with the Partnership Agreement which was included in the Net Cash
Proceeds distribution to Limited Partners in February 1995.
In December 1994, a joint venture consisting of the Partnership and an
affiliate sold the Belmere Apartments. Pursuant to the sale agreement, the
Partnership was required to retain $250,000 in cash reserves from the sale
proceeds through February 12, 1995. Subsequently, the joint venture partner
received $482,168 in February 1995, representing its share of the sale proceeds
and its share of the remaining joint venture cash reserves, net of its fourth
quarter capital contribution.
As of December 31, 1992, the Partnership had loans from the General Partner
totaling $3,213,034 which were borrowed to fund operating deficits and to meet
cash requirements. During 1993, the Partnership borrowed an additional $84,670
and subsequently repaid the loans in full using proceeds from the prepayment of
the Camelot Villa wrap-around note receivable, collection of the final payment
of the Dunwoody Park Village deferred sale proceeds and proceeds from the sale
<PAGE>
of the Village Green Apartments. In connection with these loans, the
Partnership incurred interest expense of $116,039 and $215,003 and paid
interest of $127,993 and $264,323 during 1993 and 1992, respectively. Interest
expense was computed at the American Express Company cost of funds rate plus a
spread to cover administrative costs.
In February 1992, a joint venture consisting of the Partnership and an
affiliate sold the Countryside Village Apartments and used the net proceeds
from the sale to repay, at a discount, the second mortgage loan owed to Balcor
Real Estate Holdings Inc. ("BREHI"), an affiliate of the General Partner. (See
Notes 8 and 9 of Notes to Financial Statements for additional information.) In
addition, the Partnership sold the Oak Ridge Apartments in September 1994 and
used the net proceeds from the sale to repay the second mortgage loan owed to
BREHI. (See Note 8 of Notes to Financial Statements for additional
information.)
The Partnership, in connection with its loans payable to BREHI, incurred
interest expense of $148,196, $145,516 and $223,115 and paid interest of
$162,867, $147,522 and $588,041 during 1994, 1993 and 1992, respectively.
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program. The Partnership's premiums to the deductible
insurance program were $36,814, $24,296 and $36,445 for 1994, 1993 and 1992,
respectively.
8. Property Sales:
During 1994, 1993 and 1992, the Partnership sold the Oak Ridge, Towne Oaks
South and Belmere apartment complexes, the Village Green apartment complex and
the Countryside Village apartment complex in separate all cash sales for
$26,000,000, $8,100,000 and $6,050,000, respectively. From the proceeds of the
sales, the Partnership paid $15,638,207, $6,850,000 and $4,756,687
respectively, in full satisfaction of the properties' first mortgage loans,
paid $1,600,000 in 1994 and $944,908 in 1992 to an affiliate of the General
Partner in full satisfaction of the second mortgage loans and paid brokerage
commissions and other selling costs. The basis of these properties totaled
$17,758,145, $6,169,406 and $5,577,224, net of accumulated depreciation of
$15,468,570 $4,779,592 and $2,890,733, respectively. For financial statement
purposes, the Partnership recognized gains of $7,260,202, $1,687,594 and
$449,963 from the sales of these properties during 1994, 1993 and 1992,
respectively. The affiliated minority joint venture partners share of gain
resulting from these sales was $834,090 in 1994 and $70,239 in 1992.
In addition, as a result of the sales of the Dunwoody Park Village apartment
complex, the American Colony apartment complex and the Camelot Villa mobile
home community during 1991, 1990 and 1989 respectively, the Partnership also
recognized deferred gains on the sales of these properties of $2,377,103 and
$3,719,149 in 1993 and 1992, respectively.
9. Extraordinary Item:
In February 1992, the joint venture which owned the Countryside Village
Apartments repaid, at a discount, the first and second mortgage loans
collateralized by the property. Utilizing proceeds of $6,050,000 from the sale
of the property, the joint venture paid $4,756,687 to the holder of the first
mortgage loan, representing a discount of $713,397 from the outstanding loan
balance, which was $5,470,084. The remaining proceeds of $1,293,313 were paid
to BREHI as payment of the second mortgage loan. This amount represents a
discount of $63,169 from the outstanding balance which consisted of principal
of $1,008,077 and deferred interest of $348,405. This transaction produced an
extraordinary gain on forgiveness of debt of $776,566, of which $121,222 was
the minority joint venture partner's share. (See Note 8 of Notes to Financial
Statements for additional information.)
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