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, 1994
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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 0-13349
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BALCOR REALTY INVESTORS-84
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(Exact name of registrant as specified in its charter)
Illinois 36-3215399
- - ------------------------------- -------------------
(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
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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 REALTY INVESTORS-84
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1994 and December 31, 1993
(Unaudited)
ASSETS
1994 1993
-------------- ---------------
Cash and cash equivalents $ 843,457 $ 736,429
Certificate of deposit - restricted 700,000 700,000
Net investment in note receivable 914,040
Escrow deposits 2,614,157 3,052,027
Accounts and accrued interest receivable 1,853,367 1,615,965
Deferred expenses, net of accumulated
amortization of $1,198,787 in 1994 and
$1,128,672 in 1993 1,526,126 1,570,886
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7,537,107 8,589,347
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Investment in real estate:
Land 22,657,624 22,657,624
Buildings and improvements 145,783,613 145,783,613
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168,441,237 168,441,237
Less accumulated depreciation 61,872,333 59,562,523
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Investment in real estate, net
of accumulated depreciation 106,568,904 108,878,714
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$ 114,106,011 $ 117,468,061
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LIABILITIES AND PARTNERS' CAPITAL
Loans payable - affiliate $ 13,087,098 $ 11,166,206
Accounts payable 227,270 1,040,208
Due to affiliates 436,385 207,444
Accrued liabilities, principally interest
and real estate taxes 2,704,375 4,229,868
Security deposits 632,227 599,835
Purchase price, promissory and mortgage
notes payable 126,192,987 126,356,211
Mortgage notes payable - affiliate 8,704,192 10,048,687
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Total liabilities 151,984,534 153,648,459
Affiliate's participation in joint venture (173,093) (59,731)
Partners' capital (140,000 Limited Partnership
Interests issued and outstanding) (37,705,430) (36,120,667)
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$ 114,106,011 $ 117,468,061
============== ===============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-84
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1994 and 1993
(Unaudited)
1994 1993
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Income:
Rental and service $ 15,489,535 $ 15,001,641
Interest on short-term investments 27,277 31,582
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Total income 15,516,812 15,033,223
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Expenses:
Interest on purchase price, promissory
and mortgage notes payable 5,697,479 5,981,697
Interest on short-term loans 267,355 233,954
Depreciation 2,309,810 2,308,583
Amortization of deferred expenses 282,896 288,270
Property operating 5,925,890 5,324,195
Real estate taxes 1,429,988 1,269,001
Property management fees 772,285 736,732
Administrative 524,817 485,038
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Total expenses 17,210,520 16,627,470
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Loss before affiliate's participation in loss
from joint venture and extraordinary items (1,693,708) (1,594,247)
Affiliate's participation in loss
from joint venture 108,945 219
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Loss before extraordinary items (1,584,763) (1,594,028)
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Extraordinary items:
Gain on forgiveness of debt 1,877,479
Gain on foreclosure of property 4,340,843
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Total extraordinary items 6,218,322
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Net (loss) income $ (1,584,763) $ 4,624,294
============== ==============
Loss before extraordinary items
allocated to General Partner $ (15,848) $ (15,940)
============== ==============
Loss before extraordinary items
allocated to Limited Partners $ (1,568,915) $ (1,578,088)
============== ==============
Loss before extraordinary items
per Limited Partnership Interest
(140,000 issued and outstanding) $ (11.21) $ (11.27)
============== ==============
Extraordinary items allocated to
General Partner None $ 62,183
============== ==============
Extraordinary items allocated to
Limited Partners None $ 6,156,139
============== ==============
Extraordinary items per Limited Partnership
Interest (140,000 issued and outstanding) None $ 43.97
============== ==============
Net (loss) income allocated to General Partner $ (15,848) $ 46,243
============== ==============
Net (loss) income allocated to Limited Partners $ (1,568,915) $ 4,578,051
============== ==============
Net (loss) income per Limited Partnership
Interest (140,000 issued and outstanding) $ (11.21) $ 32.70
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-84
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1994 and 1993
(Unaudited)
1994 1993
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Income:
Rental and service $ 7,856,310 $ 7,570,766
Interest on short-term investments 13,296 15,362
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Total income 7,869,606 7,586,128
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Expenses:
Interest on purchase price, promissory
and mortgage notes payable 2,904,290 2,915,618
Interest on short-term loans 155,276 128,282
Depreciation 1,156,711 1,154,291
Amortization of deferred expenses 99,478 229,456
Property operating 3,096,091 2,972,666
Real estate taxes 643,788 589,318
Property management fees 394,445 373,429
Administrative 293,475 223,471
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Total expenses 8,743,554 8,586,531
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Loss before affiliate's participation in loss
from joint venture and extraordinary items (873,948) (1,000,403)
Affiliate's participation in loss
from joint venture 101,104 1,364
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Loss before extraordinary items (772,844) (999,039)
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Extraordinary items:
Gain on forgiveness of debt 1,877,479
Gain on foreclosure of property 4,340,843
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Total extraordinary items 6,218,322
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Net (loss) income $ (772,844) $ 5,219,283
============== ==============
Loss before extraordinary items
allocated to General Partner $ (7,729) $ (9,990)
============== ==============
Loss before extraordinary items
allocated to Limited Partners $ (765,115) $ (989,049)
============== ==============
Loss before extraordinary items
per Limited Partnership Interest
(140,000 issued and outstanding) $ (5.47) $ (7.06)
============== ==============
Extraordinary items allocated to
General Partner None $ 62,183
============== ==============
Extraordinary items allocated to
Limited Partners None $ 6,156,139
============== ==============
Extraordinary items per Limited Partnership
Interest (140,000 issued and outstanding) None $ 43.97
============== ==============
Net (loss) income allocated to General Partner $ (7,729) $ 52,193
============== ==============
Net (loss) income allocated to Limited Partners $ (765,115) $ 5,167,090
============== ==============
Net (loss) income per Limited Partnership
Interest (140,000 issued and outstanding) $ (5.47) $ 36.91
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-84
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1994 and 1993
(Unaudited)
1994 1993
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Operating activities:
Net (loss) income $ (1,584,763) $ 4,624,294
Adjustments to reconcile net (loss) income
to net cash provided by or used in
operating activities:
Extraordinary items:
Gain on forgiveness of debt (1,877,479)
Gain on foreclosure of property (4,340,843)
Affiliate's participation in loss
from joint venture (108,945) (219)
Depreciation of properties 2,309,810 2,308,583
Amortization of deferred expenses 282,896 288,270
Amortization of discount on
note receivable (81,490)
Deferred interest on note receivable (131,475) (226,903)
Net change in:
Escrow deposits 551,120 (130,308)
Accounts and accrued interest
receivable (237,402) (1,439,314)
Accounts payable (812,938) (821,171)
Due to affiliates 228,941 48,327
Accrued liabilities (277,195) (24,539)
Security deposits 32,392 (22,752)
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Net cash provided by or used in
operating activities 252,441 (1,695,544)
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Investing activities:
Proceeds from redemption of restricted
investment 100,000
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Net cash provided by investing activities 100,000
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Financing activities:
Capital contribution by joint venture
partner - affiliate 4,953
Distribution to joint venture partner -
affiliate (9,370)
Proceeds from loan payable - affiliate 479,592 5,918,837
Repayment of loan payable - affiliate (4,100,000)
Proceeds from issuance of mortgage
notes payable 8,828,700 19,900,563
Repayment of mortgage notes payable (8,088,169) (15,362,805)
Repayment of mortgage notes payable -
affiliate (287,099) (1,912,948)
Principal payments on purchase price,
promissory and mortgage notes payable (731,641) (922,431)
Principal payments on mortgage notes
payable - affiliate (30,993) (7,675)
Payment of deferred expenses (198,136) (514,520)
Payment of financing escrows (113,250) (755,883)
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Net cash used in or provided by
financing activities (145,413) 2,243,138
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Net change in cash and cash equivalents 107,028 647,594
Cash and cash equivalents at beginning
of period 736,429 656,104
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Cash and cash equivalents at end of period $ 843,457 $ 1,303,698
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS-84
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
Several reclassifications have been made to the previously reported 1993
statements in order to provide comparability with the 1994 statements. 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, 1994, and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the six months ended June 30, 1994 and 1993, the Partnership incurred
interest expense on purchase price, promissory and mortgage notes payable to
non-affiliates of $5,282,516 and $5,389,253 and paid interest expense of
$5,344,445 and $5,103,751, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1994 are:
Paid
--------------------
Six Months Quarter Payable
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Property management fees $ 767,532 $390,035 $140,637
Reimbursement of expenses to
the General Partner, at cost:
Accounting 22,018 18,080 46,217
Data processing 23,476 23,476 51,784
Investor communications 3,494 2,869 6,970
Legal 9,241 7,588 25,237
Portfolio management 38,687 31,768 91,691
Other 10,954 8,995 20,201
During the six months ended June 30, 1994, $1,641,300 of an unsecured
affiliated loan related to the Chestnut Ridge Phase II Apartments was
recharacterized as a General Partner loan as a result of the March 1994
refinancing, and the partnership borrowed an additional $479,592 to meet
working capital requirements. As of June 30, 1994, the Partnership had loans
totaling $13,087,098 from the General Partner with accrued interest payable on
these loans totaling $53,648. During the six months ended June 30, 1994 and
1993, the Partnership incurred interest expense of $267,355 and $233,954, and
paid interest expense of $254,456 and $214,391 on these loans, respectively.
Interest expense is computed at the American Express Company cost of funds rate
plus a spread to cover administrative costs. As of June 30, 1994, this rate was
4.824%.
In March 1994, the Partnership refinanced the Chestnut Ridge Phase II mortgage
loans payable, including a second mortgage loan previously outstanding to
Balcor Real Estate Holdings, Inc. ("BREHI"), an affiliate of the General
Partner. See Note 4 of Notes to Financial Statements for additional
information.
As of June 30, 1994, the Partnership had junior loans outstanding from BREHI
relating to the Chestnut Ridge Phase II, Ridgepoint Hill, Ridgepoint View and
Woodland Hills apartment complexes in the aggregate amount of $8,704,192 with
accrued interest payable on these loans totaling $1,434,629. During the six
months ended June 30, 1994 and 1993, the Partnership incurred interest expense
on the affiliated loans of $414,963 and $592,444 and paid interest expense of
$828,956 and $821,906, respectively.
4. Loan Refinancings and Modification:
(a) In March 1994, the Quail Lakes Apartments loan was modified. Effective
February 1994, the interest rate increased from 6.745% to 8.25%, the maturity
date was extended from March 1995 to March 2001 and the monthly payment of
principal and interest increased from $44,612 to $51,295.
(b) In March 1994, the Partnership completed the refinancing of the mortgage
loans payable collateralized by the Chestnut Ridge Phase II Apartments. These
loans consisted of a $2,841,601 first mortgage loan from an unaffiliated lender
and junior loans from affiliates of the Partnership totaling $3,244,138,
including deferred interest of $414,897. The proceeds from the new first
mortgage loan of $3,128,700 from an unaffiliated lender were used to repay the
previous first mortgage loan and a portion of the deferred interest on the
loans from affiliates. The new first mortgage loan has an interest rate of
9.02% compared to the previous first mortgage loan rate of 9.75% and requires
monthly principal and interest payments of $25,219 through maturity in April
2001. The Partnership paid refinancing costs of $72,513 and funded capital
reserves of $15,750. As required by the unaffiliated lender, of the remaining
balances of the affiliated loans and accrued interest, $1,441,300 was converted
into a General Partner loan and the remainder was recharacterized as a
subordinate non-recourse loan of $1,315,739, and a preferred limited
partnership interest of $200,000 in the subsidiary partnership which holds
title to the property, both of which are included in mortgage notes payable -
affiliates in the balance sheet. The contract interest rates on the subordinate
non-recourse loan remains unchanged at 10.50%, which is the rate of return
earned on the preferred limited partnership interest as well. The Limited
Partners' position is unaffected by this conversion of a portion of the
affiliated loan to an equity position as Limited Partners' equity is
subordinate to the preferred interest just as it was subordinate to the
affiliated loans prior to the recharacterization.
(c) In May 1994, the first mortgage loan collateralized by Creekwood
Apartments was refinanced. The new first mortgage loan of $5,700,000 bears
interest at 8.88%, requires monthly payments of principal and interest of
$45,372 and matures in June 1999. The proceeds from the new loan were used to
repay the existing first mortgage loan of $5,246,568, fund capital reserves of
$97,500, and pay closing costs of $125,623.
5. Bankruptcy Reorganization:
A plan of reorganization was approved by the Bankruptcy Court and made
effective in May 1994 for the Pinebrook apartment complex which is owned by a
joint venture consisting of the Partnership and an affiliated partnership.
Under the plan of reorganization, the wrap-around features of the various
mortgage notes totaling $5,689,615, including net accrued interest of $504,615,
were eliminated and the notes became first, second, third and fourth mortgage
notes with interest rates ranging between 8.875% and 10%. After the
reorganization, the new first, second and fourth loan balances were $2,294,722,
$1,712,135 and $1,006,029, respectively, which includes default interest
incurred during the bankruptcy and $40,000 of lender legal fees which are
included in deferred expenses. The difference between the default interest and
the contract interest previously recorded was recognized during the second
quarter of 1994. The third mortgage of $716,729 was purchased in 1992 by a
subsidiary of the Partnership and has been eliminated through consolidation of
the financial statements.
The joint venture must attempt to sell the property within two years from the
effective date of the plan. In the event that the property is not sold by such
date, the property will be put up for auction no later than 90 days thereafter.
BALCOR REALTY INVESTORS-84
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Realty Investors-84 (the "Partnership") was formed in 1982 to invest in
and operate income-producing real property. The Partnership raised $140,000,000
from sales of Limited Partnership Interests and utilized these proceeds to
acquire twenty-three real property investments and a minority joint venture
interest in one additional property. To date, two properties have been sold and
titles to five properties, including the property in which the Partnership held
a minority joint venture interest, have been relinquished through foreclosure.
The Partnership continues to operate the seventeen remaining properties.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1993 for a more complete understanding of
the Partnership's financial position.
Operations
- - ----------
Summary of Net Loss
- - -------------------
During the second quarter of 1993, the Ridgetree Phase I first mortgage loan
was purchased at a discount which resulted in an extraordinary gain on
forgiveness of debt, and title to the Highland Glen apartment complex was
relinquished through foreclosure which resulted in an extraordinary gain on
foreclosure. As a result of these transactions, the Partnership generated a net
loss during the six months and quarter ended June 30, 1994 as compared to net
income during the same periods in 1993. Further discussion of the Partnership's
operations is summarized below.
1994 Compared to 1993
- - ---------------------
Twelve of the Partnership's remaining properties experienced improved occupancy
and/or higher rental rates in 1994, resulting in increased rental and service
income and property management fees during the six months and quarter ended
June 30, 1994 as compared to the same periods in 1993.
An increase in interest rates during 1994 caused interest expense on short-term
loans to increase during the six months and quarter ended June 30, 1994 as
compared to the same periods in 1993.
The interest rates on the Briarwood, Canyon Sands, Somerset Pointe and Sunnyoak
Village apartment complex mortgage notes payable decreased in 1993 based on
lower market rates and resulted in a decrease in interest expense on these
loans. In addition, during 1993 the Ridgetree Phase I and Woodland Hills
mortgage notes payable were refinanced at lower interest rates and reduced
total principal balances. The decreases in interest expense discussed above
were partially offset during 1994 by interest expense recognized on the
Chesapeake apartment complex mortgage note payable, which was obtained during
June 1993, and on the Quail Lakes apartment complex loan, which had principal-
only payments until June 1993 at which time the payments increased to principal
and interest. In addition, the Partnership recognized an extraordinary gain on
forgiveness of debt during April 1993 in connection with the refinancing of the
Ridgetree Phase I mortgage loan discussed above.
The Pinebrook apartment complex is owned by a joint venture consisting of the
Partnership and an affiliated partnership. The joint venture recognized other
income during 1993 in connection with the purchase of a note investment
relating to the Pinebrook apartment complex. During the quarter ended June 30,
1994, default interest expense was recognized on the third and fourth mortgage
loans in connection with the bankruptcy plan of reorganization. These
transactions resulted in an increase in affiliate's participation in loss from
joint venture during the six months and quarter ended June 30, 1994 as compared
to the same periods in 1993.
Primarily as a result of the full amortization of deferred expenses related to
the prior loan on the Highland Glen Apartments, which was lost through
foreclosure in May 1993, amortization of deferred expenses decreased during the
quarter ended June 30, 1994 as compared to the same period in 1993. This
decrease was offset for the six months ended June 30, 1994 as compared to the
same period in 1993 by the full amortization during 1994 of deferred expenses
related to the prior mortgage on the Chestnut Ridge Phase II Apartments.
Due to higher repair and maintenance expenditures, which included roof and
asphalt repairs, landscaping and replacement of floor coverings at many of the
Partnership's properties, property operating expenses increased during the six
months and quarter ended June 30, 1994 as compared to the same periods in 1993.
Due primarily to a higher tax assessment for the Ridgetree Phase I apartment
complex, real estate taxes increased during the six months and quarter ended
June 30, 1994 as compared to the same periods in 1993.
Primarily as a result of increased portfolio management and data processing
fees, administrative expenses increased during the six months and quarter ended
June 30, 1994 as compared to the same periods in 1993. This increase was
partially offset by decreased accounting fees.
During May 1993, title to the Highland Glen apartment complex was relinquished
to the mortgage holder through foreclosure. As a result, the partnership
recognized an extraordinary gain on foreclosure.
Liquidity and Capital Resources
- - -------------------------------
The cash or near cash position of the Partnership increased during the six
months ended June 30, 1994. The Partnership's operating activities consisted
primarily of cash flow generated from property operations which were offset by
the payment of administrative expenses and short-term interest expense.
Financing activities consisted of net borrowings from the General Partner, the
refinancing of mortgage notes payable and the payment of refinancing costs and
escrows, as well as principal payments on mortgage notes payable.
The Partnership is largely dependent on loans from the General Partner and owes
approximately $13,087,000 to the General Partner at June 30, 1994 in connection
with the funding of operating deficits, and borrowings needed for loan
refinancings. These loans are expected to be repaid from available cash flow
from future property operations, and from proceeds received from the
disposition or refinancing of the Partnership's real estate investments, prior
to any distributions to Limited Partners.
Although an affiliate of the General Partner has, in certain circumstances,
provided mortgage loans for certain properties to the Partnership, there can be
no assurance that loans of this type will be available from either an affiliate
or the General Partner in the future. The General Partner may continue to
provide additional short-term loans to the Partnership or to fund working
capital needs or property operating deficits, although there is no assurance
that such loans will be available. Should such short-term loans not be
available, the General Partner will seek alternative third party sources of
financing working capital. However, the current economic environment and its
impact on the real estate industry make it unlikely that the Partnership would
be able to secure financing from third parties to fund working capital needs or
operating deficits. Should additional borrowings be needed and not be available
either through the General Partner or third parties, the Partnership may be
required to dispose of some of its properties to satisfy these obligations.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit is
considered to be significant if it exceeds $250,000 annually or 20% of the
property's rental and service income. For the six months ended June 30, 1994,
thirteen of the seventeen properties owned by the Partnership generated
positive cash flow and four generated marginal cash flow deficits. For the six
months ended June 30, 1993, of these seventeen properties, eleven generated
positive cash flow and six generated marginal cash flow deficits.
Four properties which had generated marginal deficits during the six months
ended June 30, 1993 generated positive cash flow for the six months ended June
30, 1994. The Canyon Sands, Chestnut Ridge Phase II and Woodland Hills
apartment complexes experienced slightly higher rental income and slightly
lower debt service payments during 1994 while the Drayton Quarter apartment
complex experienced slightly lower property operating expenses during 1994. Two
properties that had generated positive cash flow during the six months ended
June 30, 1993 generated marginal cash flow deficits for the six months ended
June 30, 1994. The Courtyards of Kendall apartment complex experienced higher
property operating expenses during 1994 while the Ridgetree Phase I apartment
complex experienced higher real estate taxes during 1994.
The terms of the BREHI loans on the Chestnut Ridge Phase II, Ridgepoint Hill
and Ridgepoint View apartment complexes provide for deferral of certain
portions of the respective interest payments. Had the Partnership been
obligated to pay the deferred amounts for the current period, the Chestnut
Ridge Phase II apartment complex would have continued to generate positive cash
flow while the Ridgepoint Hill and Ridgepoint View apartment complexes would
have generated significant cash flow deficits during the six months ended June
30, 1994. During the six months ended June 30, 1993, Ridgepoint View would have
generated a significant cash flow deficit and Ridgepoint Hill and Chestnut
Ridge Phase II would have generated marginal cash flow deficits. At June 30,
1994, the cumulative interest deferred and outstanding on these loans totaled
$1,434,629. The deferred interest amounts are payable from proceeds received
upon the sale or refinancing of the properties or, in certain cases, from
current property cash flow if available.
While the cash flow of certain of the Partnership's properties has improved,
the General Partner continues to pursue a number of actions aimed at improving
the cash flow of the Partnership's properties including refinancing of mortgage
loans, improving property operating performance, and seeking rent increases
where market conditions allow. Despite improvements during 1993 and 1994 in the
local economies and rental markets where certain of the Partnership's
properties are located, the General Partner believes that continued ownership
of many of the properties is in the best interests of the Partnership in order
to maximize potential returns to Limited Partners. As a result, the Partnership
will continue to own these properties for longer than the holding period for
the assets originally described in the prospectus.
During the remainder of 1994 and 1995, approximately $19,172,000 and
$4,765,000, respectively, of mortgage loans collateralized by the Ridgepoint
Hill, Ridgepoint View and Drayton Quarter apartment complexes mature. Of the
1994 amount, approximately $6,634,000 represents mortgage loan financing from
an affiliate of the General Partner, which the Partnership expects to be able
to extend if not paid prior to maturity. As a result of the downturn
experienced by the real estate industry over the last few years, many banks,
savings and loans and other lending institutions have tightened mortgage
lending criteria and are generally willing to advance less funds with respect
to a property than many lenders were willing to advance during the 1980's. As a
result, in certain instances it may be difficult for the Partnership to
refinance a property in an amount sufficient to retire in full the current
mortgage financing with respect to the property. In the event negotiations with
the existing lender for a loan modification or with new lenders for a
refinancing are unsuccessful, the Partnership may sell the collateral property
or other properties to satisfy an obligation or may relinquish title to the
collateral property in satisfaction of the outstanding mortgage loan balance.
Suspension of debt service payments may lead to a renegotiation of terms with
lenders which would permit the Partnership to continue to own properties or may
lead to foreclosure or other action by lenders which would result in the
relinquishment of title to the properties in satisfaction of the outstanding
mortgage loan balances.
The Pinebrook apartment complex is owned by a joint venture consisting of the
Partnership and an affiliated partnership, and was financed with a $5,185,000
wrap-around mortgage payable, which matured in July 1993. The joint venture
suspended debt service payments during 1992 and began negotiations with the
lender for a discounted repayment of the $5,185,000 purchase money wrap-around
mortgage note. In response, the lender filed foreclosure proceedings, and in
December 1992, the joint venture filed for protection under the U.S. Bankruptcy
Code. In January 1994, a plan of reorganization was approved by the Bankruptcy
Court and was made effective in May 1994. Under the terms of the plan of
reorganization, the wrap-around features of the various mortgage notes were
eliminated and the notes became first, second, third and fourth mortgage notes.
The joint venture will make payments to the first and second mortgage holders
and any excess cash flow will be used to make payments to the third mortgage
holder, fourth mortgage holder and unsecured creditors, respectively. See Note
5 of Notes to Financial Statements for additional information.
In March 1994, the first mortgage loan collateralized by the Quail Lakes
Apartments was modified. In connection with the modification, the interest rate
was adjusted and the maturity date was extended. See Note 4 of Notes to
Financial Statements for additional information.
During March 1994, the Partnership completed the refinancing of the mortgage
loans collateralized by Chestnut Ridge Phase II Apartments. The Partnership
obtained a new first mortgage from an unaffiliated lender of $3,128,700. The
Partnership used these proceeds to repay the previous first mortgage loan and a
portion of the deferred interest on the loans from affiliates. Of the remaining
balances of the affiliated loans and deferred interest, a portion was converted
into a General Partner loan and the remainder was recharacterized as an
unsecured loan and an equity position to an affiliate of the Partnership. See
Note 4 of Notes to Financial Statements for additional information.
In May 1994, the first mortgage loan collateralized by Creekwood Apartments was
refinanced. The proceeds of the new loan of $5,700,000 were used to pay the
existing first mortgage loan of $5,246,568. The Partnership also funded capital
reserves and related closing costs. The Partnership netted $230,309 from the
transaction. See Note 4 of Notes to Financial Statements for additional
information.
An affiliate of the General Partner is providing a guarantee against a letter
of credit in the amount of $250,000 posted as additional collateral for the
funding of capital improvements on the Courtyards of Kendall apartment complex.
In addition, a certificate of deposit of $700,000 is pledged as additional
collateral for the mortgage loan relating to the Canyon Sands apartment
complex.
In July 1994, the Partnership contracted to sell the Ridgepoint Hill and
Ridgepoint View apartment complexes for a sale price of $18,659,285. The
closing of the sale of the properties is scheduled for August 17, 1994 and is
subject to the satisfaction of numerous terms and conditions.
Woodland Hills Apartments is located near the Dallas/Ft.Worth Airport. A
proposed expansion plan provides for the construction of two additional runways
on airport property. A proposed plan provides for varying levels of
compensation to single family homeowners for the expected loss in value to
their homes as a result of increased air traffic and heightened noise levels.
However, no similar compensation is planned for the majority of apartment
complex owners in the area, including the Partnership. In July 1993, the
Partnership and other affected multi-family property owners filed a lawsuit to
obtain equitable compensation. The airport board and the plaintiffs each filed
a motion for summary judgment in March and April 1994, respectively. Court-
ordered mediation between the parties held in April 1994 has not resulted in a
resolution of the matter to date. It is expected that the court will rule on
the motions during 1994.
The Briarwood apartment complex is located in the path of a planned expansion
of Price Road, which is adjacent to the property. Discussions for this
expansion have been ongoing, and the General Partner has been attending the
public hearings due to its opposition to this expansion. If the current plans
are approved, approximately 68 of the complex's 268 units would be condemned,
which would have a significant impact on the property's value. Currently it is
unclear whether the future approvals and funding for the project will be
obtained and, if obtained, what compensation the Partnership would receive for
the units or when the work would begin.
Although investors have received certain tax benefits, the Partnership has not
commenced distributions. Future distributions to investors will depend on
improved cash flow from the Partnership's remaining properties and proceeds
from future property sales, as to both of which there can be no assurances.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents depending on general
or local economic conditions. In the long-term, inflation will increase
operating costs and replacement costs and may lead to increased rental revenues
and real estate values.
BALCOR REALTY INVESTORS-84
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement, previously filed as Exhibit 4.1 to
Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated
December 16, 1983 (Registration No. 2-86317) 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. 0-13349)
are incorporated herein by reference.
(b) Reports on Form 8-K: A report on Form 8-K dated July 8, 1994 was filed,
reporting the execution of an agreement of sale to sell the Ridgepoint Hill and
Ridgepoint View apartment complexes.
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 REALTY INVESTORS-84
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Partners-XV, the General Partner
By: /s/Allan Wood
------------------------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer (Principal
Accounting and Financial Officer) of Balcor
Partners-XV, the General Partner
Date: August 12, 1994
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