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, 1995
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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
2355 Waukegan Rd., Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
--------------
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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<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
------------- --------------
Cash and cash equivalents $ 9,306,518 $ 6,190,971
Escrow deposits 2,055,525 2,082,249
Accounts and accrued interest receivable 829,174 1,101,624
Prepaid expenses 221,786 58,398
Deferred expenses, net of accumulated
amortization of $211,983 in 1995
and $148,659 in 1994 497,406 560,730
------------- --------------
12,910,409 9,993,972
------------- --------------
Investment in real estate, at cost:
Land 10,514,910 10,514,910
Buildings and improvements 70,699,599 70,699,599
------------- --------------
81,214,509 81,214,509
Less accumulated depreciation 34,503,015 32,293,590
------------- --------------
Investment in real estate, net of
accumulated depreciation 46,711,494 48,920,919
------------- --------------
$ 59,621,903 $ 58,914,891
============= ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 201,359 $ 225,336
Due to affiliates 20,234 67,045
Accrued liabilities, principaly interest
and real estate taxes 2,157,934 1,853,632
Security deposits 218,409 214,196
Mortgage notes payable 39,631,585 40,078,625
------------- --------------
Total liabilities 42,229,521 42,438,834
Partners' capital (52,811 Limited Partnership
Interests issued and outstanding) 17,392,382 16,476,057
------------- --------------
$ 59,621,903 $ 58,914,891
============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
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, 1995 and 1994
(Unaudited)
1995 1994
------------- --------------
Income:
Rental $ 9,690,486 $ 9,424,095
Service 2,444,518 2,274,374
Interest on short-term investments 350,328 126,970
Other income 227,155
------------- --------------
Total income 12,712,487 11,825,439
------------- --------------
Expenses:
Interest on mortgage notes payable 2,740,534 2,864,958
Depreciation 2,209,425 2,194,344
Amortization of deferred expenses 63,324 48,617
Property operating 4,040,421 4,281,357
Real estate taxes 1,039,850 1,002,489
Property management fees 604,034 713,901
Administrative 306,409 360,567
Participation in loss of joint venture
with an affiliate 53,979
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Total expenses 11,003,997 11,520,212
------------- --------------
Net income $ 1,708,490 $ 305,227
============= ==============
Net income allocated to General Partner $ 17,085 $ 3,052
============= ==============
Net income allocated to Limited Partners $ 1,691,405 $ 302,175
============= ==============
Net income per Limited Partnership Interest
(52,811 issued and outstanding) $ 32.03 $ 5.72
============= ==============
Distributions to Limited Partners $ 792,165 $ 792,165
============= ==============
Distributions per Limited Partnership
Interests (52,811 issued and outstanding) $ 15.00 $ 15.00
============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1995 and 1994
(Unaudited)
1995 1994
------------- --------------
Income:
Rental $ 3,269,817 $ 3,266,824
Service 827,968 553,180
Interest on short-term investments 136,747 64,864
------------- --------------
Total income 4,234,532 3,884,868
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Expenses:
Interest on mortgage notes payable 905,854 923,482
Depreciation 736,474 731,448
Amortization of deferred expenses 21,108 22,895
Property operating 1,669,876 1,619,626
Real estate taxes 359,770 212,801
Property management fees 198,954 247,801
Administrative 87,949 115,289
Participation in loss of joint
venture with an affiliate 17,593
------------- --------------
Total expenses 3,979,985 3,890,935
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Net income (loss) $ 254,547 $ (6,067)
============= ==============
Net income (loss) allocated to General Partner$ 2,546 $ (61)
============= ==============
Net income (loss) allocated
to Limited Partners $ 252,001 $ (6,006)
============= ==============
Net income (loss) per Limited Partnership
Interest (52,811 issued and outstanding) $ 4.77 $ (0.12)
============= ==============
Distribution to Limited Partners $ 264,055 $ 264,055
============= ==============
Distribution per Limited Partnership Interest
(52,811 issued and outstanding) $ 5.00 $ 5.00
============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
------------- --------------
Operating activities:
Net income $ 1,708,490 $ 305,227
Adjustments to reconcile net income to net
cash provided by operating activities:
Partcipation in loss
of joint venure with affiliate 53,979
Depreciation of properties 2,209,425 2,194,344
Amortization of deferred expenses 63,324 48,617
Collection of recoverable expenses 1,509,618
Net change in:
Escrow deposits 26,724 102,898
Accounts and accrued interest receivable (209,779) (131,019)
Prepaid expenses (163,388) (42,181)
Accounts payable (23,977) (144,191)
Due to affiliates (46,811) 82,933
Accrued liabilities 304,302 (210,991)
Security deposits 4,213 3,286
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Net cash provided by operating activities 3,872,523 3,772,520
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Investing activities:
Capital contributions to joint
venture with affiliate (16,105)
Distribution from joint venture
with affiliate 482,229
Improvements to properties (253,703)
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Net cash provided by (used in)
investing activities 482,229 (269,808)
------------- --------------
Financing activities:
Distributions to Limited Partners (792,165) (792,165)
Repayment of mortgage note payable (11,700,000)
Proceeds from refinancing of mortgage
note payable 13,000,000
Payment of deferred expenses (401,372)
Release of capital improvement escrow 79,898
Funding of capital improvement escrows (903,512)
Principal payments on mortgage notes payable (447,040) (368,856)
------------- --------------
Net cash used in financing activities (1,239,205) (1,086,007)
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Net change in cash and cash equivalents 3,115,547 2,416,705
Cash and cash equivalents at
beginning of period 6,190,971 3,280,330
------------- --------------
Cash and cash equivalents at end of period $ 9,306,518 $ 5,697,035
============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
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, 1995, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1995 and 1994, the Partnership
incurred interest expense on mortgage notes payable of $2,740,534 and
$2,864,958 and paid interest expense of $2,865,819 and $3,006,404,
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, 1995 are:
Paid
-----------------------
Nine Months Quarter Payable
------------ --------- --------
Reimbursement of expenses to
the General Partner, at cost: $153,237 $18,552 $20,234
4. Subsequent Event:
In October 1995, 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
1995.
<PAGE>
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, which was sold in 1994. The Partnership continues to
operate four 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 1994 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
- ---------------------
Improved operations at two of the Partnership's properties resulted in an
increase in net income for the nine months ended September 30, 1995 as compared
to the same period in 1994. An increase in service income at the 101 Marietta
Tower office complex resulted in net income for the quarter ended September 30,
1995 as compared to a net loss for the same period in 1994. Further discussion
of the Partnership's operations is summarized below.
1995 Compared to 1994
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1995 and 1994 refer
to both the quarter and nine months ended September 30, 1995 and 1994.
Service income increased during the quarter ended September 30, 1995 as
compared to the same period in 1994 due to an increase in reimbursements for
tenants' expenditures at the 101 Marietta Tower office complex.
Due to higher cash balances and interest rates, interest income on short-term
investments increased during 1995 as compared to 1994.
A lower property assessment at the 101 Marietta Tower office complex,
retroactive to the 1993 tax year, has reduced real estate tax expense and
recoverable expenses. The lower property assessment resulted in a refund of
1993 real estate taxes which was received and recognized as other income in the
nine months ended September 30, 1995. In addition, due to the timing of the
reassessment in the third quarter of 1994, the Partnership recognized higher
real estate taxes during the third quarter of 1995 as compared to 1994.
The refinancing of the Knollwood Village mortgage note payable in 1994 required
the payment of deferred expenses which are now being amortized over the term of
<PAGE>
the mortgage note payable. As a result, amortization expense increased for the
nine months ended September 30, 1995 as compared to the same period in 1994.
A recalculation of the recoverable expenses as required by the terms of the
General Service Administration ("GSA") lease at the 101 Marietta Tower office
complex was made in late 1993. Additional income related to this recalculation
was received in the second and third quarters of 1994, resulting in additional
management fees. This caused a decrease in property management fees during
1995 as compared to 1994.
Due to lower portfolio management fees, administrative expenses decreased
during 1995 as compared to 1994.
Belmere Apartments, in which the Partnership held a minority joint venture
interest, was sold during December 1994. The Partnership recognized a
participation in loss of joint venture with an affiliate during 1994 with
regard to this property.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased as of September 30, 1995 as
compared to December 31, 1994. The increase resulted primarily from increased
cash flow from operations of the Partnership's properties, a portion of which
was used for distributions to Limited Partners.
The Partnership defines cash flow generated from its properties as an amount
equal to the property's revenue receipts less property related expenditures,
which include debt service payments. During the nine months ended September
30, 1995 and 1994, all four of the Partnership's properties generated positive
cash flow. Belmere Apartments, in which the Partnership held a minority joint
venture interest, was sold in December 1994 and was generating a marginal cash
flow deficit during 1994 prior to its sale. While the cash flow of certain of
the Partnership's properties has improved, the General Partner continues to
pursue actions aimed at improving property operating performance and to seek
rent increases where market conditions allow.
As of September 30, 1995, the occupancy rates of the Partnership's residential
properties ranged from 93% to 100%, while the occupancy rate at the 101
Marietta Tower office complex was 98%.
Approximately 83% of the space at the 101 Marietta Tower office complex is
leased to the General Service Administration ("GSA"), which will expire in
December 1997, and 57% of the Partnership's total rental and service income
recognized for the nine months of 1995 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 office building in Atlanta. This project is
under construction and is scheduled to be completed in late 1996. Current
plans call for various 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 all or most of its space by the end of its lease term in
1997. At the current time, the Partnership has commenced discussions with
prospective buyers for the sale of the 101 Marietta Tower. However, a sale is
subject to many factors and therefore may not be completed.
<PAGE>
In October 1995, the Partnership paid $264,055 ($5.00 per Interest)
representing the quarterly distribution to Limited Partners for the third
quarter of 1995. The level of this distribution is consistent with that of the
prior quarter. Assuming property operations meet current projections, the
Partnership anticipates making regular quarterly distributions from the
Partnership's continuing property operations and from any cash reserves above
an amount necessary to protect against unforeseen events. To date, Limited
Partners have received distributions of Net Cash Receipts totaling $115.50 and
Net Cash Proceeds totaling $14.50 per $1,000 Interest, as well as certain tax
benefits. It is expected that the remaining properties will be sold over the
next two to three years and the Partnership will be liquidated at that time.
However, the timetable for the liquidation is largely dependent upon the sale
of the 101 Marietta Tower.
In December 1994, the joint venture in which the Partnership owned a 25.6%
interest sold the Belmere Apartments for a sale price of $8,500,000. From the
sale proceeds, the joint venture repaid the first mortgage loan and other costs
and received approximately $1,755,000. In February 1995, the Partnership
received a distribution of $482,229 which represents its share of sales
proceeds and fourth quarter property operations. This amount was included in
accounts receivable in the financial statements at December 31, 1994.
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. As a result of the General
Partner's efforts to modify and refinance these loans, the Partnership has no
third party financing which matures prior to 1998.
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.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 5. Other Information
- --------------------------
101 Marietta Tower
- -----------------
As previously reported, on September 13, 1995, the Partnership contracted to
sell the 101 Marietta Tower office building and a leasehold interest in 200
parking spaces in the parking garage across the street for a sale price of
$31,750,000. The purchaser exercised its option to terminate the contract and
the closing did not occur. The $250,000 in earnest money previously deposited
and interest accrued thereon has been returned to the purchaser.
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, 1995 is attached hereto.
(b) Reports on Form 8-K:
(i) A Current Report on Form 8-K dated September 13, 1995 was filed relating to
the contract for the sale of the 101 Marietta Tower office building, Atlanta,
Georgia.
(ii) A Current Report on Form 8-K dated September 14, 1995, as amended by Form
8-K/A dated October 27, 1995, was filed reporting a change in the Registrant's
certifying public accountants.
(99) Due Diligence Termination Notice relating to the contract for the sale of
the 101 Marietta Tower office building, Atlanta, Georgia.
<PAGE>
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/Brian D. Parker
----------------------------------
Brian D. Parker
Senior Vice President, and
Chief Financial Officer
(Principal Accountant and Financial
Officer) of Balcor Equity Partners -
XVIII, the General Partner
Date: November 14, 1995
---------------------
<PAGE>
Exhibit 99
EXHIBIT A
DUE DILIGENCE TERMINATION NOTICE
State of FLORIDA )
) SS.
County of BROWARD )
The undersigned, having been first duly sworn, does hereby affirm, depose and
state that Taurus Investment Group, Inc., as Purchaser under that certain
Agreement of Sale dated September 13, 1995, providing for the sale of property
located in Atlanta, Georgia and known as 101 Marietta Tower and Seller's
leasehold interest in the garage located at 79 Marietta Street, in Atlanta,
Georgia, and has terminated the Agreement pursuant to Paragraph 7.1 thereof.
The undersigned demands return of all earnest money deposited under the
Agreement pursuant to his right therein.
IN WITNESS WHEREOF, the undersigned has executed this Affidavit on this 12th
day of October, 1995.
Letter dated October 12, 1995,
requesting an extension PURCHASER
of the Inspection Period
is attached hereto. TAURUS INVESTMENT GROUP, INC.,
a Florida Corporation
By: /S/ Steve Munson
Print Name: Steve E. Munson
Title: Sr. Vice President - Acquisitions
Subscribed and sworn to before
me, a Notary Public in and for Letter Agreement dated October 13,
said County and State. 1995, extending the expiration of
the Inspection Period to 12:00
Noon on Monday, October 16, 1995,
/S/Linda G. Kassof is attached hereto.
Notary Public
Please wire-transfer the Earnest Money
Deposit in the amount of $250,000,
pursuant to the wire instructions
attached hereto.
<PAGE>
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<PERIOD-END> SEP-30-1995
<CASH> 9307
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<RECEIVABLES> 829
<ALLOWANCES> 0
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<PP&E> 81215
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<BONDS> 39632
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0
0
<OTHER-SE> 17392
<TOTAL-LIABILITY-AND-EQUITY> 59622
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<TOTAL-REVENUES> 12712
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<TOTAL-COSTS> 5684
<OTHER-EXPENSES> 2579
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