SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - -----
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 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
September 30, 1994 and December 31, 1993
(Unaudited)
ASSETS
1994 1993
-------------- --------------
Cash and cash equivalents $ 1,284,493 $ 736,429
Certificate of deposit - restricted 700,000 700,000
Net investment in note receivable 914,040
Escrow deposits 3,042,549 3,052,027
Accounts and accrued interest receivable 1,666,497 1,615,965
Deferred expenses, net of accumulated
amortization of $985,135 in 1994 and
$1,128,672 in 1993 1,429,617 1,570,886
-------------- --------------
8,123,156 8,589,347
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Investment in real estate:
Land 18,397,507 22,657,624
Buildings and improvements 130,982,523 145,783,613
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149,380,030 168,441,237
Less accumulated depreciation 56,740,376 59,562,523
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Investment in real estate, net
of accumulated depreciation 92,639,654 108,878,714
-------------- --------------
$ 100,762,810 $ 117,468,061
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Loans payable - affiliate $ 13,371,634 $ 11,166,206
Accounts payable 241,199 1,040,208
Due to affiliates 315,644 207,444
Accrued liabilities, principally interest
and real estate taxes 1,621,714 4,229,868
Security deposits 581,810 599,835
Purchase price, promissory and mortgage
notes payable 113,057,762 126,356,211
Mortgage notes payable - affiliate 2,015,474 10,048,687
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Total liabilities 131,205,237 153,648,459
Affiliate's participation in joint venture (261,926) (59,731)
Partners' capital (140,000 Limited Partnership
Interests issued and outstanding) (30,180,501) (36,120,667)
-------------- --------------
$ 100,762,810 $ 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 nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
-------------- --------------
Income:
Rental and service $ 23,157,422 $ 22,510,129
Interest on short-term investments 46,977 47,463
-------------- --------------
Total income 23,204,399 22,557,592
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Expenses:
Interest on purchase price, promissory
and mortgage notes payable 8,404,099 9,115,177
Interest on short-term loans 442,178 345,702
Depreciation 3,426,885 3,462,876
Amortization of deferred expenses 379,405 372,840
Property operating 9,308,900 8,317,741
Real estate taxes 2,045,093 1,891,708
Property management fees 1,155,384 1,113,157
Administrative 687,576 705,796
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Total expenses 25,849,520 25,324,997
-------------- --------------
Loss before gains on sales of properties,
affiliate's participation in loss from
joint venture and extraordinary items (2,645,121) (2,767,405)
Gains on sales of properties 5,596,294
Affiliate's participation in loss
from joint venture 197,778 28,020
-------------- --------------
Income (loss) before extraordinary items 3,148,951 (2,739,385)
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Extraordinary items:
Gains on forgiveness of debt 2,791,215 1,877,479
Gain on foreclosure of property 4,340,843
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Total extraordinary items 2,791,215 6,218,322
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Net income $ 5,940,166 $ 3,478,937
============== ==============
Income (loss) before extraordinary items
allocated to General Partner $ 31,490 $ (27,394)
============== ==============
Income (loss) before extraordinary items
allocated to Limited Partners $ 3,117,461 $ (2,711,991)
============== ==============
Income (loss) before extraordinary items
per Limited Partnership Interest
(140,000 issued and outstanding) $ 22.27 $ (19.37)
============== ==============
Extraordinary items allocated to
General Partner $ 27,912 $ 62,183
============== ==============
Extraordinary items allocated to
Limited Partners $ 2,763,303 $ 6,156,139
============== ==============
Extraordinary items per Limited Partnership
Interest (140,000 issued and outstanding) $ 19.74 $ 43.97
============== ==============
Net income allocated to General Partner $ 59,402 $ 34,789
============== ==============
Net income allocated to Limited Partners $ 5,880,764 $ 3,444,148
============== ==============
Net income per Limited Partnership Interest
(140,000 issued and outstanding) $ 42.01 $ 24.60
============== ==============
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 September 30, 1994 and 1993
(Unaudited)
1994 1993
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Income:
Rental and service $ 7,667,887 $ 7,508,488
Interest on short-term investments 19,700 15,881
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Total income 7,687,587 7,524,369
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Expenses:
Interest on purchase price, promissory
and mortgage notes payable 2,706,620 3,133,480
Interest on short-term loans 174,823 111,748
Depreciation 1,117,075 1,154,293
Amortization of deferred expenses 96,509 84,570
Property operating 3,383,010 2,993,546
Real estate taxes 615,105 622,707
Property management fees 383,099 376,425
Administrative 162,759 220,758
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Total expenses 8,639,000 8,697,527
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Loss before gains on sales of properties,
affiliate's participation in loss from
joint venture and extraordinary item (951,413) (1,173,158)
Gains on sales of properties 5,596,294
Affiliate's participation in loss
from joint venture 88,833 27,801
-------------- --------------
Income (loss) before extraordinary item 4,733,714 (1,145,357)
Extraordinary item:
Gains on forgiveness of debt 2,791,215
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Net income (loss) $ 7,524,929 $ (1,145,357)
============== ==============
Income (loss) before extraordinary item
allocated to General Partner $ 47,338 $ (11,454)
============== ==============
Income (loss) before extraordinary item
allocated to Limited Partners $ 4,686,376 $ (1,133,903)
============== ==============
Income (loss) before extraordinary item
per Limited Partnership Interest
(140,000 issued and outstanding) $ 33.48 $ (8.10)
============== ==============
Extraordinary item allocated to
General Partner $ 27,912 None
============== ==============
Extraordinary item allocated to
Limited Partners $ 2,763,303 None
============== ==============
Extraordinary item per Limited Partnership
Interest (140,000 issued and outstanding) $ 19.74 None
============== ==============
Net income (loss) allocated to General Partners$ 75,250 $ (11,454)
============== ==============
Net income (loss) allocated to Limited Partners$ 7,449,679 $ (1,133,903)
============== ==============
Net income (loss) per Limited Partnership
Interest (140,000 issued and outstanding) $ 53.22 $ (8.10)
============== ==============
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 nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Operating activities:
Net income $ 5,940,166 $ 3,478,937
Adjustments to reconcile net income to net
cash provided by or used in operating
activities:
Extraordinary items:
Gains on forgiveness of debt (2,791,215) (1,877,479)
Gain on foreclosure of property (4,340,843)
Gains on sales of properties (5,596,294)
Affiliate's participation in loss
from joint venture (197,778) (28,020)
Depreciation of properties 3,426,885 3,462,876
Amortization of deferred expenses 379,405 372,840
Amortization of discount on note
receivable (112,816)
Deferred interest on note receivable (131,475) (324,364)
Net change in:
Escrow deposits 122,728 (756,579)
Accounts and accrued interest
receivable (50,532) (940,430)
Accounts payable (799,009) 1,147
Due to affiliates 108,200 11,882
Accrued liabilities 178,623 589,271
Security deposits (18,025) (24,299)
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Net cash provided by or used in operating
activities 571,679 (487,877)
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Investing activities:
Proceeds from redemption of restricted
investments 100,000
Proceeds from sales of properties 18,659,285
Additions to properties (48,774)
Payment of selling costs (250,816)
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Net cash provided by investing activities 18,408,469 51,226
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Financing activities:
Capital contribution by joint venture
partner - affiliate 4,953
Distributions to joint venture partner
- affiliate (9,370) (23,780)
Proceeds from loan payable - affiliate 764,128 5,918,837
Repayment of loan payable - affiliate (6,144,984)
Proceeds from issuance of mortgage notes
payable 8,828,700 20,132,897
Repayment of mortgage notes payable (20,626,168) (15,362,805)
Repayment of mortgage notes payable
- affiliate (5,668,638) (1,912,948)
Principal payments on purchase price,
promissory and mortgage notes payable (1,328,867) (1,217,493)
Principal payments on mortgage notes
payable - affiliate (85,436) (7,675)
Payment of deferred expenses (198,136) (689,872)
Payment of financing escrows (113,250) (755,883)
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Net cash used in financing activities (18,432,084) (63,706)
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Net change in cash and cash equivalents 548,064 (500,357)
Cash and cash equivalents at beginning of
period 736,429 656,104
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Cash and cash equivalents at end of period $ 1,284,493 $ 155,747
============== ==============
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 nine months and quarter ended
September 30, 1994, and all such adjustments are of a normal and recurring
nature.
2. Interest Expense:
During the nine months ended September 30, 1994 and 1993, the Partnership
incurred interest expense on purchase price, promissory and mortgage notes
payable to non-affiliates of $7,815,542 and $8,239,237 and paid interest
expense of $7,852,322 and $7,874,938, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1994 are:
Paid
--------------------
Nine Months Quarter Payable
----------- -------- ---------
Property management fees $1,163,270 $395,738 $127,998
Reimbursement of expenses to
the General Partner, at cost:
Accounting 57,579 35,561 26,412
Data processing 44,988 21,512 54,976
Investor communications 9,137 5,643 4,460
Legal 24,166 14,925 9,485
Portfolio management 101,165 62,478 25,803
Other 28,646 17,692 6,814
During the nine months ended September 30, 1994, $1,441,300 of an unsecured
affiliated loan related to the Chestnut Ridge Phase II Apartments was retired
and replaced with a General Partner loan as a result of the March 1994
refinancing of that property, and the partnership borrowed an additional
$764,128 to meet working capital requirements. As of September 30, 1994, the
Partnership had loans totaling $13,371,634 from the General Partner with
accrued interest payable on these loans totaling $59,696. During the nine
months ended September 30, 1994 and 1993, the Partnership incurred interest
expense of $442,178 and $345,702, and paid interest expense of $423,231 and
$364,942 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 September 30, 1994, this rate was 5.362%.
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, and the unsecured loan described above. See Note 4 of Notes to
Financial Statements for additional information.
In August 1994, the Partnership repaid the Ridgepoint Hill and Ridgepoint View
BREHI loans at a discount in connection with the sale of these properties. See
Note 5 of Notes to Financial Statements for additional information.
As of September 30, 1994, the Partnership had junior loans outstanding from
BREHI relating to the Chestnut Ridge Phase II and Woodland Hills apartment
complexes in the aggregate amount of $2,015,474 with accrued interest payable
on these loans totaling $28,000. During the nine months ended September 30,
1994 and 1993, the Partnership incurred interest expense on the affiliated
loans of $588,557 and $875,940 and paid interest expense of $870,701 and
$1,168,984, 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 loans
relating to 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 retired and replaced
with a General Partner loan and the remainder was retired and replaced with 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. Property Sales:
In August 1994, the Partnership sold the Ridgepoint Hill and Ridgepoint View
apartment complexes located in Dallas, Texas for an all cash sales price of
$18,659,285. From the proceeds of the sale, the Partnership paid $12,658,037,
which included accrued interest of $120,038, in full satisfaction of the first
mortgage loans collateralized by these properties, $186,593 to an unaffiliated
party as a brokerage commission and $64,223 in closing and other costs. The
basis of these properties was $12,812,175, net of accumulated depreciation of
$6,249,032. For financial statement purposes, the Partnership recognized a gain
of $5,596,294 from the sale of these properties. The remaining $5,750,432 of
sales proceeds, plus or minus prorations, were paid to an affiliate of the
General Partner in full satisfaction of the second mortgage loans and an
unsecured third mortgage loan. This represents a discount of $2,791,215 from
the outstanding balance of the affiliated loans and accrued interest. The
Partnership did not receive any proceeds from the sale of the properties.
6. 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.
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, four 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 fifteen 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 Operations
- - ---------------------
During the third quarter of 1994, the Ridgepoint Hill and Ridgepoint View
apartment complexes were sold and certain of the related loans were repaid at a
discount. During the second quarter of 1993, the Ridgetree Phase I first
mortgage loan was purchased at a discount and title to the Highland Glen
apartment complex was relinquished through foreclosure. As a result of these
transactions, the Partnership generated increased net income during the nine
months ended September 30, 1994 as compared to the same period in 1993 and
generated net income during the quarter ended September 30, 1994 as compared to
a net loss during the same period in 1993. Further discussion of the
Partnership's operations is summarized below.
1994 Compared to 1993
- - ---------------------
In August 1994, the Partnership sold the Ridgepoint Hill and Ridgepoint View
apartment complexes and repaid the second mortgage loans and unsecured third
mortgage loan from an affiliate of the General Partner at a discount. As a
result, the Partnership recognized gains on the sales of the properties and
extraordinary gains on forgiveness of debt during the nine months and quarter
ended September 30, 1994. 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. 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. The 1994 property sales and the 1993 foreclosure resulted
in decreases in rental and service income, interest expense on purchase price,
promissory and mortgage notes payable, depreciation, property operating
expenses, real estate taxes and property management fees during the nine months
and quarter ended September 30, 1994 as compared to the same periods in 1993.
These decreases were partially or, in certain cases, fully offset by the events
described below.
Thirteen 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 nine months and quarter
ended September 30, 1994 as compared to the same periods in 1993, which fully
offset the decreases from the property sales and foreclosure.
Due to an increase in the short-term loan balance and an increase in interest
rates during 1994, interest expense on short-term loans increased during the
nine months and quarter ended September 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.
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 as well as higher repairs and maintenance expenditures at the
property which had been deferred due to the bankruptcy resulted in an increase
in affiliate's participation in loss from joint venture during the nine months
and quarter ended September 30, 1994 as compared to the same periods in 1993.
As a result of the full amortization during 1994 of deferred expenses related
to the prior mortgages on the Chestnut Ridge Phase II Apartments, which was
refinanced, and the Ridgepoint Hill and Ridgepoint View apartment complexes,
which were sold, amortization of deferred expenses increased during the nine
months and quarter ended September 30, 1994 as compared to the same periods in
1993. This increase was substantially offset during the nine months ended
September 30, 1994 as compared to the same period in 1993 by the full
amortization of deferred expenses related to the prior loan on the Highland
Glen Apartments, which was lost through foreclosure in May 1993.
Due to higher repair and maintenance expenditures, which included roof repairs,
landscaping and replacement of floor coverings at many of the Partnership's
properties, property operating expenses increased during the nine months and
quarter ended September 30, 1994 as compared to the same periods in 1993, which
fully offset the decrease from the property sales and foreclosure.
Due primarily to a higher tax assessment for the Ridgetree Phase I apartment
complex, real estate taxes increased during the nine months ended September 30,
1994 as compared to the same period in 1993, which fully offset the decrease
from the property sales and foreclosure.
Primarily as a result of decreased accounting and legal fees, administrative
expenses decreased during the quarter ended September 30, 1994 as compared to
the same period in 1993.
Liquidity and Capital Resources
- - -------------------------------
The cash position of the Partnership increased during the nine months ended
September 30, 1994. The Partnership's operating activities consisted primarily
of cash flow generated from property operations which were partially offset by
the payment of administrative expenses and short-term interest expense.
Investing activities consisted of the proceeds from the sales of properties,
net of selling costs. Financing activities consisted primarily of borrowings
from the General Partner, the repayment of mortgage notes payable in connection
with the property sales, 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 $13,400,000 to the General Partner at September 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 nine months ended September 30,
1994, twelve of the fifteen remaining properties owned by the Partnership
generated positive cash flow and three generated marginal cash flow deficits.
For the nine months ended September 30, 1993, of these fifteen properties, ten
generated positive cash flow and five generated marginal cash flow deficits.
Four properties which had generated marginal deficits during the nine months
ended September 30, 1993 generated positive cash flow for the nine months ended
September 30, 1994. The Canyon Sands, and Woodland Hills apartment complexes
experienced slightly higher rental income and slightly lower debt service
payments while the Drayton Quarter apartment complex experienced slightly lower
property operating expenses and the Chestnut Ridge Phase II apartment complex
experienced slightly higher rental income during 1994. Two properties that had
generated positive cash flow during the nine months ended September 30, 1993
generated marginal cash flow deficits for the nine months ended September 30,
1994. The Pinebrook apartment complex experienced higher property operating
expenses while the Ridgetree Phase I apartment complex experienced higher real
estate taxes and lower rental income during 1994.
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 1995, the Partnership has only one loan maturing, a mortgage loan of
approximately $4,765,000 collateralized by the Drayton Quarter apartment
complex. 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. The joint
venture must attempt to sell the property by May 1996. In the event that the
property is not sold by then, the property will be put up for auction no later
than 90 days thereafter. See Note 6 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 repay the
existing first mortgage loan of $5,246,568. The Partnership also funded capital
reserves and related closing costs. See Note 4 of Notes to Financial Statements
for additional information.
In August 1994, the Partnership sold the Ridgepoint Hill and Ridgepoint View
apartment complexes, repaid the first mortgage loans in full and repaid the
second mortgage loans and unsecured third mortgage loan from an affiliate of
the General Partner at a discount. The Partnership did not receive any proceeds
from the sale of the properties. See Note 5 of Notes to Financial Statements
for additional information.
An affiliate of the General Partner had been 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. During 1994, the letter of credit was cashed and applied to the
principal balance of the underlying mortgage loan. 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.
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 did not result in a resolution and on
October 12, 1994, the airport board's motion for summary judgment was granted.
If the judgment stands in the airport board's favor, the Partnership would not
receive any compensation as a result of the airport expansion. On October 24,
1994, the plaintiffs filed a motion for a new trial and/or to alter the
judgment based on certain facts not previously considered. This motion is
pending. If the court does not rule in favor of the plaintiffs, the
Partnership will consider its other options including a possible appeal of the
summary judgment.
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.
On November 4, 1994, The Balcor Company completed the sale of the assets of
Allegiance Realty Group, Inc. to an unaffiliated company, Insignia Allegiance
Management, Inc. ("Insignia"), which is based in Greenville, South Carolina. As
a result of this transaction, Insignia has assumed the management of the
Partnership's properties. This transaction is not expected to result in any
material change to the property management fees paid by the Partnership.
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 5. Other Information
- - -------------------------
Ridgepoint Hill Apartments and Ridgepoint View Apartments
- - ---------------------------------------------------------
As previously reported, in July 1994, the Partnership executed an agreement to
sell the Ridgepoint Hill ("Hill") and Ridgement View ("View") apartment
complexes in Dallas, Texas (together, the "Properties"), for a total sale price
of $18,659,285 to an unaffiliated party, Berkshire Realty Company, Inc., a
Delaware corporation, which subsequently assigned its rights under the
agreement to its affiliate, BRI Ridgepoint Business Trust. The sale closed on
August 30, 1994 ("Closing"). At Closing, the sale price was allocated
$9,254,766 to Hill and $9,404,519 to View. The Partnership paid $12,658,037,
which included accrued interest of $120,038, in full satisfaction of the first
mortgage loans collateralized by the Properties and paid $5,750,432 to an
affiliate of the General Partner in full satisfaction of the second mortgage
loans collateralized by the Properties and an unsecured third mortgage loan.
This represented a discount of approximately $2,791,215 from the amounts due
under the loans. The Partnership also paid $186,593 to an unaffiliated party as
a brokerage commission and $64,223 in closing costs. The Partnership did not
receive any proceeds from the sale of the Properties.
Two apartment complexes adjacent to the Properties owned by an affiliate of the
General Partner were sold to the purchaser simultaneously with the Properties.
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.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1994 is attached hereto.
(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: November 14, 1994
----------------------------
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