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
- -----
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-13357
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BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3274349
- ------------------------------- -------------------
(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
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1994 and December 31, 1993
(Unaudited)
ASSETS
1994 1993
-------------- --------------
Cash and cash equivalents $ 5,697,035 $ 3,280,330
Escrow deposits 1,930,016 1,209,300
Accounts and accrued interest receivable 647,133 2,025,732
Prepaid expenses, principally real
estate taxes 197,389 155,208
Deferred expenses, net of accumulated
amortization of $129,337 in 1994 and
$80,720 in 1993 651,552 298,797
-------------- --------------
9,123,125 6,969,367
-------------- --------------
Investment in real estate, at cost:
Land 10,514,910 10,514,910
Buildings and improvements 70,620,019 70,366,316
-------------- --------------
81,134,929 80,881,226
Less accumulated depreciation 31,552,088 29,357,744
-------------- --------------
Investment in real estate, net
of accumulated depreciation 49,582,841 51,523,482
-------------- --------------
$ 58,705,966 $ 58,492,849
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 16,000 $ 160,191
Due to affiliates 158,990 76,057
Accrued liabilities, principally interest
and real estate taxes 1,606,909 1,817,900
Security deposits 211,168 207,882
Loss in excess of investment in joint
venture with an affiliate 332,006 294,132
Purchase price, promissory and mortgage
notes payable 40,220,568 39,289,424
-------------- --------------
Total liabilities 42,545,641 41,845,586
Partners' capital (52,811 Limited Partnership
Interests issued and outstanding) 16,160,325 16,647,263
-------------- --------------
$ 58,705,966 $ 58,492,849
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
-------------- --------------
Income:
Rental $ 9,424,095 $ 9,170,355
Service 2,274,374 1,326,970
Interest on short-term investments 126,970 68,691
-------------- --------------
Total income 11,825,439 10,566,016
-------------- --------------
Expenses:
Interest on purchase price, promissory
and mortgage notes payable 2,864,958 2,703,775
Depreciation 2,194,344 2,271,069
Amortization of deferred expenses 48,617 16,096
Property operating 4,281,357 4,363,221
Real estate taxes 1,002,489 1,199,305
Property management fees 713,901 548,411
Administrative 360,567 266,026
Participation in loss of joint venture
with an affiliate 53,979 55,392
-------------- --------------
Total expenses 11,520,212 11,423,295
-------------- --------------
Net income (loss) $ 305,227 $ (857,279)
============== ==============
Net income (loss) allocated to General Partner $ 3,052 $ (8,573)
============== ==============
Net income (loss) allocated to Limited Partners $ 302,175 $ (848,706)
============== ==============
Net income (loss) per Limited Partnership
Interest (52,811 issued and outstanding) $ 5.72 $ (16.07)
============== ==============
Distributions to Limited Partners $ 792,165 None
============== ==============
Distributions per Limited Partnership Interest
(52,811 issued and outstanding) $ 15.00 None
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1994 and 1993
(Unaudited)
1994 1993
-------------- --------------
Income:
Rental $ 3,266,824 $ 3,106,486
Service 553,180 383,352
Interest on short-term investments 64,864 23,664
-------------- --------------
Total income 3,884,868 3,513,502
-------------- --------------
Expenses:
Interest on purchase price, promissory
and mortgage notes payable 923,482 751,337
Depreciation 731,448 757,022
Amortization of deferred expenses 22,895 12,861
Property operating 1,619,626 1,467,253
Real estate taxes 212,801 351,675
Property management fees 247,801 184,220
Administrative 115,289 37,765
Participation in loss of joint venture
with an affiliate 17,593 19,639
-------------- --------------
Total expenses 3,890,935 3,581,772
-------------- --------------
Net loss $ (6,067) $ (68,270)
============== ==============
Net loss allocated to General Partner $ (61) $ (683)
============== ==============
Net loss allocated to Limited Partners $ (6,006) $ (67,587)
============== ==============
Net loss per Limited Partnership
Interest (52,811 issued and outstanding) $ (0.12) $ (1.28)
============== ==============
Distribution to Limited Partners $ 264,055 None
============== ==============
Distribution per Limited Partnership Interest
(52,811 issued and outstanding) $ 5.00 None
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
-------------- --------------
Operating activities:
Net income (loss) $ 305,227 $ (857,279)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Participation in loss of joint venture
with an affiliate 53,979 55,392
Depreciation of properties 2,194,344 2,271,069
Amortization of deferred expenses 48,617 16,096
Collection of recoverable expenses 1,509,618
Insurance claim receivable (77,032)
Net change in:
Escrow deposits 102,898 (792,691)
Accounts and accrued interest
receivable (53,987) (208,756)
Prepaid expenses (42,181) 165,702
Accounts payable (144,191) (255,211)
Due to affiliates 82,933 8,386
Accrued liabilities (210,991) (102,812)
Security deposits 3,286 17,908
-------------- --------------
Net cash provided by operating activities 3,772,520 317,804
-------------- --------------
Investing activities:
Capital contributions to joint venture
with an affiliate (16,105) (21,693)
Improvements to properties (253,703) (88,172)
-------------- --------------
Net cash used in investing activities (269,808) (109,865)
-------------- --------------
Financing activities:
Distributions to Limited partners (792,165)
Repayment of mortgage notes payable (11,700,000) (9,001,276)
Proceeds from refinancing of mortgage
notes payable 13,000,000 9,300,000
Payment of deferred expenses (401,372) (269,517)
Release of capital improvement escrow 79,898
Funding of capital improvement escrows (903,512)
Principal payments on purchase price,
promissory and mortgage notes payable (368,856) (314,238)
-------------- --------------
Net cash used in financing activities (1,086,007) (285,031)
-------------- --------------
Net change in cash and cash equivalents 2,416,705 (77,092)
Cash and cash equivalents at beginning
of period 3,280,330 3,078,388
-------------- --------------
Cash and cash equivalents at end of period $ 5,697,035 $ 3,001,296
============== ==============
The accompanying notes are an integral part of the financial statements.
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
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 of $2,864,958 and $2,703,775 and paid interest expense of $3,006,404
and $2,961,011, 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 $706,373 $255,103 $66,030
Reimbursement of expenses to
the General Partner, at cost:
Accounting 39,644 26,746 19,068
Data processing 12,583 6,773 17,263
Investor communications 8,573 5,784 5,609
Legal 10,607 7,156 9,511
Portfolio management 57,913 39,072 36,600
Other 17,477 11,791 4,909
4. Loan Refinancing:
In June 1994, the Partnership completed the refinancing of the Knollwood
Village Apartments mortgage loan, which was scheduled to mature in December
1994. The principal balance on the prior loan was $11,700,000 and bore interest
at a rate of 9.00%. The Partnership incurred a prepayment penalty of $155,839
in connection with retiring the loan, which has been recorded as interest
expense. The terms of the new loan provide for a $13,000,000 mortgage balance
with a 9.55% interest rate, monthly principal and interest payments of
$109,786, and a maturity date of July 2004. Fees of $401,372 were paid in
connection with the refinancing and $302,060 and $903,512 were deposited into
real estate tax and capital improvement escrow accounts, respectively.
5. Subsequent Event:
In October 1994, the Partnership made a distribution of $264,055 ($5.00 per
Interest) to the holders of Limited Partnership Interests representing the
quarterly distribution of available Net Cash Receipts for the third quarter of
1994.
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Equity Properties-XVIII A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1984 to invest in and operate
income-producing real property. The Partnership raised $52,811,000 through the
sale of Limited Partnership Interests and utilized these proceeds to acquire
four real property investments and a minority joint venture interest in one
additional real property. The Partnership continues to operate these
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
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Summary of Operations
- ---------------------
Increased service income at the 101 Marietta Tower office complex resulted in
net income for the Partnership during the nine months 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
- ---------------------
Higher rental rates at the Canyon Point, Hidden Lake and Knollwood Village
apartment complexes resulted in an increase in rental income for the nine
months and quarter ended September 30, 1994 as compared to some periods in
1993.
As required by the terms of the General Service Administration ("GSA") lease at
the 101 Marietta Tower office complex, a recalculation of the recoverable
expenses was made in late 1993. This calculation has resulted in an increase in
service income and property management fees during the nine months and quarter
ended September 30, 1994 when compared to the same periods in 1993.
Due to higher cash balances and interest rates, interest income on short-term
investments increased during the nine months and quarter ended September 30,
1994 as compared to the same periods in 1993.
As a result of a prepayment penalty, which has been recorded as interest
expense, and a higher mortgage loan balance associated with the Knollwood
Village Apartments refinancing in June 1994, interest expense on purchase
price, promissory and mortgage notes payable increased for the nine months and
quarter ended September 30, 1994 as compared to same periods in 1993. This
increase was partially offset by the 1993 refinancings of the Hidden Lakes and
Canyon Point apartment complexes' mortgage notes at lower rates.
The refinancings of the Hidden Lakes, Canyon Point and Knollwood Village
apartment complexes' mortgage notes required the payment of deferred expenses
which are now being amortized over the terms of the mortgage notes payable. As
a result, amortization expense increased for the nine months ended September
30, 1994 as compared to the same period in 1993.
As a result of higher insurance and janitorial expenses in the third quarter of
1994 at the 101 Marietta Tower office complex, property operating expense
increased for the quarter ended September 30, 1994 as compared to the same
period in 1993.
A lower property assessment at the 101 Marietta Tower office complex caused
real estate tax expense to decrease for the nine months and quarter ended
September 30, 1994 as compared to same periods in 1993.
Due to higher portfolio management, data processing, legal and accounting fees,
administrative expenses increased during the nine months and quarter ended
September 30, 1994 when compared to the same periods in 1993.
Liquidity and Capital Resources
- -------------------------------
The cash or near cash position of the Partnership increased as of September 30,
1994 when compared to December 31, 1993. The Partnership's cash flow provided
by operating activities was generated by cash flow from the properties which
included the collection of approximately $1,500,000 of recoverable expenses
from GSA at the 101 Marietta Tower office complex. The operating activities
also include receipt of short-term interest income and payment of
administrative expenses. Cash used in investing activities consisted of tenant
improvements at the 101 Marietta Tower office complex and a capital
contribution to the joint venture for the Partnership's share of operating
deficits at the Belmere Apartments. Cash used in financing activities consisted
of principal payments on the Partnership's purchase price, promissory and
mortgage notes payable, distributions to Limited Partners, a release of a
capital improvement escrow at Hidden Lakes Apartments and activity associated
with the refinancing of the Knollwood Village Apartments mortgage note payable.
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. During the nine months ended September
30, 1994 and 1993, the Hidden Lakes, Canyon Point, Knollwood Village apartment
complexes and the 101 Marietta Tower office complex generated positive cash
flow. The Belmere apartment complex, in which the Partnership holds a minority
joint venture interest, operated at a marginal cash flow deficit during both
periods.
While the cash flow of the Partnership's properties has improved, the General
Partner continues to pursue actions aimed at improving property operating
performance and seek rent increases where market conditions allow. Despite
improvements 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. The
Belmere apartment complex is currently being marketed for sale; however, the
Partnership expects to continue to own the remaining properties for longer than
the holding period originally described in the prospectus.
Approximately 83% of the space at the 101 Marietta Tower office complex is
leased to GSA and 48% of the Partnership's total rental and service income
recognized during the first nine months of 1994 relates to GSA. In August 1992,
GSA exercised an option under the existing lease to extend its lease for an
additional five years through December 1997. The Federal government has
approved construction of a new 1.2 million square foot office building in
Atlanta. This project is scheduled to be completed in 1997 and current plans
call for twelve Federal agencies (including GSA) to be relocated from their
current offices into the new project. If completed on time, it is likely that
GSA would vacate the property at the end of its lease term in 1997 and the
Partnership would have the responsibility to lease this space.
In October 1994, the Partnership paid $264,055 ($5.00 per Interest)
representing the quarterly distribution to Limited Partners for the third
quarter of 1994. The level of this distribution is consistent with that of the
prior quarter. To date, investors have received distributions of Net Cash
Receipts totaling $95.50 and Net Cash Proceeds totaling $14.50 per $1,000
Interest, as well as certain tax benefits. Continued distributions will depend
on the level of cash flow generated by the Partnership's properties and
proceeds from future property sales, as to all of which there can be no
assurances.
Each of the Partnership's properties is owned through the use of third-party
mortgage loan financing and, therefore, the Partnership is subject to the
financial obligations required by such loans. The $11,700,000 mortgage loan
collateralized by the Knollwood Village apartment complex, which had a maturity
date of December 1994, was refinanced in June 1994. See Note 4 of Notes to the
Financial Statements for additional information. As a result of the General
Partner's successful efforts to obtain loan modifications as well as
refinancings of many existing loans with new lenders, the Partnership has no
third party financing which matures prior to 1998.
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 and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(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 Registrant's Registration Statement on Form S-11 dated May
15, 1984 (Registration No. 2-89380), 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. 0-13357)
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: No reports were filed on Form 8-K during the quarter
ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR EQUITY PROPERTIES - XVIII
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Thomas E. Meador
----------------------------------
Thomas E. Meador
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Equity Partners -
XVIII, 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
Equity Partners - XVIII, the General
Partner
Date: November 10, 1994
---------------------
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