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 March 31, 1996
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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 0-13357
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BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Illinois 36-3274349
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
2355 Waukegan Rd., Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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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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<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
(Unaudited)
ASSETS
1996 1995
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Cash and cash equivalents $ 18,989,171 $ 10,008,666
Escrow deposits 979,390 1,694,388
Accounts and accrued interest receivable 183,346 809,538
Prepaid expenses 18,011 178,688
Deferred expenses, net of accumulated
amortization of $181,408 in 1996
and $233,092 in 1995 417,984 476,297
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20,587,902 13,167,577
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Investment in real estate:
Land 2,667,759 10,331,853
Buildings and improvements 36,049,478 69,865,669
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38,717,237 80,197,522
Less accumulated depreciation 19,700,166 35,250,546
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Investment in real estate, net of
accumulated depreciation 19,017,071 44,946,976
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$ 39,604,973 $ 58,114,553
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 42,885 $ 204,221
Due to affiliates 39,263 33,430
Accrued liabilities, principally interest
and real estate taxes 160,041 1,539,679
Security deposits 171,089 201,907
Mortgage notes payable 21,961,851 39,475,209
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Total liabilities 22,375,129 41,454,446
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Limited Partners' capital (52,811
Interests issued and outstanding) 17,443,096 16,881,697
General Partner's deficit (213,252) (221,590)
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Total partners' capital 17,229,844 16,660,107
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$ 39,604,973 $ 58,114,553
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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 March 31, 1996 and 1995
(Unaudited)
1996 1995
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Income:
Rental $ 1,984,166 $ 3,205,428
Service 154,578 674,801
Interest on short-term investments 205,597 108,533
Other income 206,159
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Total income 2,344,341 4,194,921
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Expenses:
Interest on mortgage notes payable 546,494 919,382
Depreciation 395,669 736,475
Amortization of deferred expenses 20,299 21,108
Property operating 729,493 1,115,765
Real estate taxes 353,537 340,138
Property management fees 162,465 195,281
Administrative 90,359 87,725
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Total expenses 2,298,316 3,415,874
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Income before extraordinary item: 46,025 779,047
Extraordinary item:
Gain on extinguishment of debt 787,767
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Net income $ 833,792 $ 779,047
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Income before extraordinary item
allocated to General Partner $ 460 $ 7,790
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Income before extraordinary item
allocated to Limited Partners $ 45,565 $ 771,257
============== ==============
Income before extraordinary item
per Limited Partnership Interest
(52,811 issued and outstanding) $ 0.86 $ 14.60
============== ==============
Extraordinary item allocated to
General Partner $ 7,878 None
============== ==============
Extraordinary item allocated to
Limited Partners $ 779,889 None
============== ==============
Extraordinary item per Limited
Partnership Interest (52,811
issued and outstanding) $ 14.77 None
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<PAGE>
Net income allocated to General Partner $ 8,338 $ 7,790
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Net income allocated to Limited Partners $ 825,454 $ 771,257
============== ==============
Net income per Limited Partnership Interest
(52,811 issued and outstanding) $ 15.63 $ 14.60
============== ==============
Distribution to Limited Partners $ 264,055 $ 264,055
============== ==============
Distribution per Limited Partnership
Interests (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 quarters ended March 31, 1996 and 1995
(Unaudited)
1996 1995
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Operating activities:
Net income $ 833,792 $ 779,047
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on extinguishment of debt (787,767)
Depreciation of properties 395,669 736,475
Amortization of deferred expenses 20,299 21,108
Net change in:
Escrow deposits 682,676 (163,090)
Accounts and accrued interest
receivable 626,192 (14,759)
Prepaid expenses 160,677
Accounts payable (161,336) (5,686)
Due to affiliates 5,833 27,637
Accrued liabilities (553,857) (258,359)
Security deposits (30,818) (1,262)
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Net cash provided by operating activities 1,191,360 1,121,111
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Investing activities:
Distribution from joint venture
with affiliate 482,229
Proceeds from sale of real estate 8,646,849
Costs incurred in connection with sale
of real estate (465,743)
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Net cash provided by
investing activities 8,181,106 482,229
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Financing activities:
Distribution to Limited Partners (264,055) (264,055)
Release of capital improvement escrow 76,851
Funding of capital improvement escrow (44,550)
Principal payments on mortgage
notes payable (160,207) (145,421)
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Net cash used in financing activities (391,961) (409,476)
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Net change in cash and cash equivalents 8,980,505 1,193,864
Cash and cash equivalents at
beginning of period 10,008,666 6,190,971
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Cash and cash equivalents at end of period $ 18,989,171 $ 7,384,835
============== ==============
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 quarter ended March 31,
1996, and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the quarter ended March 31, 1996 and 1995, the Partnership incurred
interest expense on mortgage notes payable of $546,494 and $919,382 and paid
interest expense of $944,079 and $958,866, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1996 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost: $22,932 $39,263
4. Property Sale:
In February 1996, the Partnership sold 101 Marietta Tower office complex in an
all cash sale for $26,000,000. The purchaser of the 101 Marietta Tower office
complex acquired the property subject to the existing $17,353,151 first
mortgage loan and the Partnership paid $465,743 consisting of a brokerage
commission and other closing costs. The basis of the property was written down
at December 31, 1995 to an amount equal to the sales price less closing costs.
As a result, the Partnership recognized a $1,016,987 provision for investment
property writedown in 1995, and no gain or loss on the property sale in 1996.
5. Extraordinary Item:
The purchaser of the 101 Marietta Tower office complex acquired the property in
February 1996 subject to the existing first mortgage loan. The Partnership
recognized an extraordinary gain on extinguishment of debt of $787,767 in 1996
representing the difference between the contractual amount of the first
mortgage loan at the time of sale of $17,353,151 and the carrying amount of the
note for financial statement purposes of $16,565,384 which included $825,781 of
accrued interest and the write-off of deferred fees of $38,014.
6. Subsequent Event:
In April 1996, the Partnership made a distribution of $16,371,410 ($310.00 per
Interest) to the holders of Limited Partnership Interests representing the
regular quarterly distribution of Net Cash Receipts of $5.00 per Interest for
the first quarter of 1996, a special Net Cash Receipts distribution of $130.00
per Interest from cash reserves, and a special distribution of Net Cash
Proceeds of $175.00 per Interest primarily from the 101 Marietta Tower sale
proceeds.
<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. The joint venture property was sold in 1994 and 101
Marietta Tower office complex was sold in February 1996. The Partnership
continues to operate three 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 1995 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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Due to the February 1996 sale of the 101 Marietta Tower office complex, the
Partnership recognized decreased income before extraordinary item during 1996.
In addition, the purchaser of the 101 Marietta Tower office complex acquired
the property subject to the existing first mortgage loan and the Partnership
recognized an extraordinary gain on extinguishment of debt in 1996. As a
result of these occurrences, the Partnership recognized a slight increase in
net income during the first quarter of 1996 as compared to 1995. Further
discussion of the Partnership's operations is summarized below.
1996 Compared to 1995
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Unless otherwise noted, discussions of fluctuations between 1996 and 1995 refer
to the quarters ended March 31, 1996 and 1995.
Due to the February 1996 sale of 101 Marietta Tower office complex, the
Partnership recognized lower rental and service income, interest on mortgage
notes payable, depreciation, property operating, and property management fee
expenses during 1996 as compared to 1995.
Due to higher cash balances resulting from the proceeds received from the 101
Marietta Tower sale, interest income on short-term investments increased during
1996 as compared to 1995.
A lower property assessment at the 101 Marietta Tower office complex,
retroactive to the 1993 tax year, resulted in a refund of 1993 real estate
taxes received during 1995. This amount was recognized as other income in the
quarter ended March 31, 1995.
The decrease in property operating expense due to the 101 Marietta Tower
<PAGE>
office comples sale was partially offset by additional payroll and repairs
and maintenance costs incurred at the Knollwood
Village Apartments during 1996.
The purchaser of the 101 Marietta Tower office complex acquired the property in
February 1996 subject to the existing first mortgage loan. The Partnership
recognized an extraordinary gain on extinguishment of debt in 1996 representing
the difference between the contractual amount of the first mortgage loan at the
date of sale and the carrying amount of the note for financial statement
purposes. See Note 5 of Notes to Financial Statements for additional
information.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $8,981,000 as
of March 31, 1996 as compared to December 31, 1995 primarily due to the
proceeds received from the sale of 101 Marietta Tower office complex. Cash flow
of approximately $1,191,000 was provided by operating activities during 1996
consisting primarily of cash provided by the operation of the Partnership's
properties and interest income received on short-term investments. The
Partnership's investing activities generated cash of approximately $8,181,000
from the sale of 101 Marietta Tower office complex. Cash of approximately
$392,000 was used in financing activities primarily consisting of distributions
to Limited Partners and principal payments on mortgage notes 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. 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. All three of the Partnership's remaining properties have underlying
debt. During 1996 and 1995, all three of the Partnership's properties generated
positive cash flow. 101 Marietta Tower office complex generated positive cash
flow in 1995 and before it was sold in February 1996. As of March 31, 1996,
the occupancy rates of the Partnership's properties ranged from 94% to 99%.
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.
The General Partner believes that the market for multifamily housing properties
has become increasingly favorable to sellers of these properties. Currently,
the Partnership has entered into a contract to sell Mallard Cove Apartments for
a sales price of $7,850,000 and is preparing to market the remaining two
properties in its portfolio. During February 1996, the Partnership sold the
101 Marietta Tower office complex. If current market conditions remain
favorable and the General Partner can obtain appropriate sales prices, the
Partnership's liquidation strategy may be accelerated.
In April 1996, the Partnership paid $16,371,410 ($310.00 per Interest)
representing the regular quarterly distribution of Net Cash Receipts of $5.00
per Interest for the first quarter of 1996, a special Net Cash Receipts
distribution of $130.00 per Interest from cash reserves, and a special
distribution of Net Cash Proceeds of $175.00 per Interest primarily from 101
Marietta Tower office complex sale proceeds. The level of the regular quarterly
Net Cash Receipts distribution is consistent with that of the prior quarter.
Assuming property operations meet current projections, the Partnership
<PAGE>
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. Including the April 1996
distribution, Limited Partners have received distributions of Net Cash Receipts
totaling $255.50 and Net Cash Proceeds totaling $189.50 per $1,000 Interest, as
well as certain tax benefits. In light of results to date and current market
conditions, the General Partner does not anticipate that investors will recover
all of their original investment.
In February 1996, the Partnership sold the 101 Marietta Tower office complex
for a sales price of $26,000,000. The purchaser acquired the property subject
to the existing $17,353,151 first mortgage loan and the Partnership received
the net proceeds of approximately $8,181,000. See Notes 4 and 5 of Notes to
Financial Statements for additional information.
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 6. Exhibits and Reports on Form 8-K
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(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.
(10) Agreement of Sale and attachment thereto relating to the sale of the
Mallard Cove Apartments previously filed as Exhibit 10 to the Registrant's
Current Report on Form 8-K dated April 23, 1996 is incorporated herein by
reference.
(27) Financial Data Schedule of the Registrant for the quarter ended March 31,
1996 is attached hereto.
(b) Reports on Form 8-K:
A Current Report on Form 8-K dated April 23, 1996 was filed relating to the
contract for the sale of the Mallard Cove Apartments, Greenville, South
Carolina.
<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: May 14, 1996
---------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 18989
<SECURITIES> 0
<RECEIVABLES> 183
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20170
<PP&E> 38717
<DEPRECIATION> 19700
<TOTAL-ASSETS> 39605
<CURRENT-LIABILITIES> 413
<BONDS> 21962
0
0
<COMMON> 0
<OTHER-SE> 17230
<TOTAL-LIABILITY-AND-EQUITY> 39605
<SALES> 0
<TOTAL-REVENUES> 2344
<CGS> 0
<TOTAL-COSTS> 1246
<OTHER-EXPENSES> 506
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 546
<INCOME-PRETAX> 46
<INCOME-TAX> 0
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<EXTRAORDINARY> 788
<CHANGES> 0
<NET-INCOME> 834
<EPS-PRIMARY> 15.63
<EPS-DILUTED> 15.63
</TABLE>
