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, 1996
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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.)
2355 Waukegan Rd., Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 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, 1996 and December 31, 1995
(Unaudited)
ASSETS
1996 1995
--------------- --------------
Cash and cash equivalents $ 5,083,108 $ 10,008,666
Escrow deposits 1,008,603 1,694,388
Accounts and accrued interest receivable 77,286 809,538
Prepaid expenses 93,383 178,688
Deferred expenses, net of accumulated
amortization of $147,833 in 1996
and $233,092 in 1995 295,286 476,297
--------------- --------------
6,557,666 13,167,577
--------------- --------------
Investment in real estate, at cost:
Land 2,065,748 10,331,853
Buildings and improvements 27,902,273 69,865,669
--------------- --------------
29,968,021 80,197,522
Less accumulated depreciation 16,825,060 35,250,546
--------------- --------------
Investment in real estate, net of
accumulated depreciation 13,142,961 44,946,976
--------------- --------------
$ 19,700,627 $ 58,114,553
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 55,694 $ 204,221
Due to affiliates 56,683 33,430
Accrued liabilities, principally interest
and real estate taxes 221,661 1,539,679
Security deposits 153,358 201,907
Mortgage notes payable 17,924,471 39,475,209
--------------- --------------
Total liabilities 18,411,867 41,454,446
--------------- --------------
Limited Partners' capital (52,811
Interests issued and outstanding) 1,484,506 16,881,697
General Partner's deficit (195,746) (221,590)
--------------- --------------
Total partners' capital 1,288,760 16,660,107
--------------- --------------
$ 19,700,627 $ 58,114,553
=============== ==============
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, 1996 and 1995
(Unaudited)
1996 1995
--------------- --------------
Income:
Rental $ 5,079,207 $ 9,690,486
Service 261,119 2,444,518
Interest on short-term investments 355,007 350,328
Other income 227,155
--------------- --------------
Total income 5,695,333 12,712,487
--------------- --------------
Expenses:
Interest on mortgage notes payable 1,469,034 2,740,534
Depreciation 1,121,429 2,209,425
Amortization of deferred expenses 53,819 63,324
Property operating 2,109,657 4,040,421
Real estate taxes 647,820 1,039,850
Property management fees 320,942 604,034
Administrative 366,651 306,409
--------------- --------------
Total expenses 6,089,352 11,003,997
--------------- --------------
(Loss) income before gain on sale of
property and extraordinary items (394,019) 1,708,490
Gain on sale of property 2,279,824
--------------- --------------
Income before extraordinary items 1,885,805 1,708,490
Extraordinary items:
Gain on extinguishment of debt 787,767
Debt extinguishment expense (89,179)
--------------- --------------
Net income $ 2,584,393 $ 1,708,490
=============== ==============
Income before extraordinary items
allocated to General Partner $ 18,858 $ 17,085
=============== ==============
Income before extraordinary items
allocated to Limited Partners $ 1,866,947 $ 1,691,405
=============== ==============
Income before extraordinary items
per Limited Partnership Interest
(52,811 issued and outstanding) $ 35.35 $ 32.03
=============== ==============
Extraordinary items allocated to
General Partner $ 6,986 None
=============== ==============
<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, 1996 and 1995
(Unaudited)
(Continued)
Extraordinary items allocated to
Limited Partners 691,602 None
$ ============= ==============
Extraordinary items per Limited
Partnership Interest (52,811
issued and outstanding) $ 13.10 None
=============== ==============
Net income allocated to General Partner $ 25,844 $ 17,085
=============== ==============
Net income allocated to Limited Partners $ 2,558,549 $ 1,691,405
=============== ==============
Net income per Limited Partnership Interest
(52,811 issued and outstanding) $ 48.45 $ 32.03
=============== ==============
Distributions to Limited Partners $ 17,955,740 $ 792,165
=============== ==============
Distributions per Limited Partnership
Interests (52,811 issued and outstanding) $ 340.00 $ 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, 1996 and 1995
(Unaudited)
1996 1995
--------------- --------------
Income:
Rental $ 1,388,142 $ 3,269,817
Service 47,088 827,968
Interest on short-term investments 80,534 136,747
--------------- --------------
Total income 1,515,764 4,234,532
--------------- --------------
Expenses:
Interest on mortgage notes payable 412,216 905,854
Depreciation 330,091 736,474
Amortization of deferred expenses 14,030 21,108
Property operating 757,702 1,669,876
Real estate taxes 139,121 359,770
Property management fees 69,553 198,954
Administrative 75,875 87,949
--------------- --------------
Total expenses 1,798,588 3,979,985
--------------- --------------
(Loss) income before gain on sale of
property and extraordinary item (282,824) 254,547
Gain on sale of property 2,279,824
--------------- --------------
Income before extraordinary item 1,997,000 254,547
Extraordinary item:
Debt extinguishment expense (89,179)
--------------- --------------
Net income $ 1,907,821 $ 254,547
=============== ==============
Income before extraordinary item
allocated to General Partner $ 19,970 $ 2,546
=============== ==============
Income before extraordinary item
allocated to Limited Partners $ 1,977,030 $ 252,001
=============== ==============
Income before extraordinary item
per Limited Partnership Interest
(52,811 issued and outstanding) $ 37.43 $ 4.77
=============== ==============
Extraordinary item allocated to
General Partner $ (892) None
=============== ==============
<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, 1996 and 1995
(Unaudited)
(Continued)
Extraordinary item allocated to
Limited Partners $ (88,287) None
=============== ==============
Extraordinary item per Limited
Partnership Interest (52,811
issued and outstanding) $ (1.67) None
=============== ==============
Net income allocated to General Partner $ 19,078 $ 2,546
=============== ==============
Net income allocated to Limited Partners $ 1,888,743 $ 252,001
=============== ==============
Net income per Limited Partnership
Interest (52,811 issued and outstanding) $ 35.76 $ 4.77
=============== ==============
Distribution to Limited Partners $ 1,320,275 $ 264,055
=============== ==============
Distribution per Limited Partnership
Interest (52,811 issued and outstanding) $ 25.00 $ 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, 1996 and 1995
(Unaudited)
1996 1995
--------------- --------------
Operating activities:
Net income $ 2,584,393 $ 1,708,490
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of property (2,279,824)
Gain on extinguishment of debt (787,767)
Debt extinguishment expense 89,179
Depreciation of properties 1,121,429 2,209,425
Amortization of deferred expenses 53,819 63,324
Net change in:
Escrow deposits 742,562 26,724
Accounts and accrued interest
receivable 732,252 (209,779)
Prepaid expenses 85,305 (163,388)
Accounts payable (148,527) (23,977)
Due to affiliates 23,253 (46,811)
Accrued liabilities (492,237) 304,302
Security deposits (48,549) 4,213
--------------- --------------
Net cash provided by operating activities 1,675,288 3,872,523
--------------- --------------
Investing activities:
Distribution from joint venture
with affiliate 482,229
Proceeds from sales of real estate 16,496,849
Costs incurred in connection with sales
of real estate (887,569)
--------------- --------------
Net cash provided by investing activities 15,609,280 482,229
--------------- --------------
Financing activities:
Distributions to Limited Partners (17,955,740) (792,165)
Repayment of mortgage note payable (3,962,005)
Release of capital improvement escrow 76,851
Funding of capital improvement escrow (133,650)
Principal payments on mortgage
notes payable (235,582) (447,040)
--------------- --------------
Net cash used in financing activities (22,210,126) (1,239,205)
--------------- --------------
<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, 1996 and 1995
(Unaudited)
(Continued)
Net change in cash and cash equivalents (4,925,558) 3,115,547
Cash and cash equivalents at
beginning of period 10,008,666 6,190,971
--------------- --------------
Cash and cash equivalents at end of period $ 5,083,108 $ 9,306,518
=============== ==============
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, 1996, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1996 and 1995, the Partnership
incurred interest expense on mortgage notes payable of $1,469,034, and
$2,740,534 and paid interest expense of $1,866,618 and $2,865,819,
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, 1996 are:
Paid
-----------------------
Nine Months Quarter Payable
------------ --------- -----------
Reimbursement of expenses to
the General Partner, at cost: $ 70,141 $ 8,479 $ 56,683
4. Property Sales:
(a) In February 1996, the Partnership sold the 101 Marietta Tower office
complex 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 selling 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.
(b) In July 1996, the Partnership sold the Mallard Cove Apartments in an all
cash sale for $7,850,000. From the proceeds of the sale, the Partnership paid
$3,962,005 to the third party mortgage holder in full satisfaction of the first
mortgage loan, and paid $421,826 in selling costs. The basis of the property
was $5,148,350, which is net of accumulated depreciation of $3,432,919. For
financial statement purposes, the Partnership recognized a gain of $2,279,824
from the sale of this property.
5. Extraordinary Items:
(a) 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
<PAGE>
$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.
(b) In July 1996, the Partnership sold the Mallard Cove Apartments. In
connection with the sale the Partnership fully amortized the remaining deferred
expenses in the amount of $89,179. This amount was recognized as an
extraordinary item and was classified as a debt extinguishment expense.
6. Subsequent Events:
(a) In October 1996, the Partnership made a distribution of $3,696,770 ($70.00
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 third quarter of 1996 and a special Net Cash Proceeds distribution of
$65.00 per Interest from the Mallard Cove Apartments sale.
(b) In October 1996, the Partnership sold the Knollwood Village Apartments in
an all cash sale for $22,250,000. From the proceeds of the sale, the
Partnership paid $12,810,259 to the third party mortgage holder in full
satisfaction of the first mortgage loan, and paid $1,151,082 in selling costs
which includes $347,632 of prepayment penalties. For financial statement
purposes, the Partnership will recognize a gain of approximately $13,511,000
from the sale of this property during the fourth quarter of 1996.
<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, the 101
Marietta Tower office complex was sold in February 1996, Mallard Cove
Apartments was sold in July 1996 and Knollwood Village Apartments was sold in
October 1996. The Partnership continues to operate the Canyon Point Apartments.
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
- ----------
Summary of Operations
- ---------------------
Due to the February 1996 and July 1996 sales of the 101 Marietta Tower office
complex and the Mallard Cove Apartments, respectively, the Partnership
recognized a loss before gain on sale of real estate and extraordinary items
for the nine months and quarter ended September 30, 1996 as compared to income
for the same periods in 1995. The Partnership recognized a gain on sale of
property in connection with the July 1996 sale of the Mallard Cove Apartments.
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 the first quarter
of 1996. As a result of these events the Partnership recognized an increase in
net income for the nine months and quarter ended September 30, 1996 as compared
to the same periods in 1995. Further discussion of the Partnership's operations
is summarized below.
1996 Compared to 1995
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1996 and 1995 refer
to both the nine months and quarters ended September 30, 1996 and 1995.
Due to the February 1996 sale of 101 Marietta Tower office complex and the July
1996 sale of Mallard Cove Apartments, the Partnership recognized lower rental
and service income, interest on mortgage notes payable, depreciation,
amortization, property operating, real estate taxes, and property management
fee expenses during 1996 as compared to 1995.
<PAGE>
Interest income on short-term investments decreased during the quarter ended
September 30, 1996 as compared to the same period in 1995 due to lower average
cash balances resulting from the special distribution of sales proceeds to
Limited Partners in July 1996.
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 which was received in two installments during the first and second
quarters of 1995, and was recognized as other income during the nine months
ended September 30, 1995.
The decrease in property operating expense resulting from the 1996 property
sales was partially offset by additional payroll and repairs and maintenance
costs incurred at the Canyon Point Apartments during 1996. In addition to the
decrease caused by the sales, property operating expense decreased at the
Knollwood Village Apartments for the quarter ended September 30, 1996 as
compared to the same period in 1995 due to exterior painting and repairs
expense incurred in 1995.
The Partnership incurred additional consulting fees during 1996. As a result,
administrative expenses increased during the nine months ended September 30,
1996 as compared to the same period in 1995. Due to decreased legal fees,
administrative expenses decreased during the quarter ended September 30, 1996
as compared to the same period in 1995.
The Partnership recognized a gain on sale of real estate of $2,279,824 during
1996 in connection with the July 1996 sale of the Mallard Cove Apartments.
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 date of sale and the carrying amount of the note for
financial statement purposes. In addition, in connection with the sale of the
Mallard Cove Apartments in July 1996, the Partnership fully amortized the
remaining deferred expenses relating to the mortgage loan which resulted in the
recognition of debt extinguishment expense in 1996. See Note 5 of Notes to
Financial Statements for additional information.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $4,926,000 as
of September 30, 1996 as compared to December 31, 1995 primarily due to
distributions to Limited Partners from property sales. Cash flow of
approximately $1,675,000 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 which was
partially offset by the payment of administrative expenses. The Partnership's
investing activities generated cash of approximately $15,609,000 from the sales
of 101 Marietta Tower office complex and Mallard Cove Apartments. Cash of
approximately $22,210,000 was used in financing activities primarily consisting
of distributions to Limited Partners, the repayment of the Mallard Cove
Apartments mortgage note payable and monthly principal payments on mortgage
notes payable.
<PAGE>
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. Both of the Partnership's remaining
properties owned at September 30, 1996, have underlying debt and during each of
1996 and 1995, generated positive cash flow. The 101 Marietta Tower office
complex and the Mallard Cove Apartments generated positive cash flow in 1995
and before they were sold in February 1996 and July 1996, respectively. As of
September 30, 1996, the occupancy rates of the Partnership's properties were
94% at Canyon Point Apartments and 97% at Knollwood Village Apartments.
The General Partner believes that the market for multifamily housing properties
is favorable to sellers of these properties. During February, July and October
1996, the Partnership sold the 101 Marietta Tower office complex, the Mallard
Cove Apartments and the Knollwood Village Apartments, respectively. As a
result of weaknesses in the San Antonio market the Partnership is not actively
marketing the Canyon Point Apartments for sale. If current market conditions
become favorable and the General Partner can obtain an appropriate sales price
for the Canyon Point Apartments, the Partnership's liquidation strategy will be
accelerated.
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 paid
selling costs of $465,743. The Partnership received net proceeds of $8,181,106
which were distributed to Limited Partners in April 1996. See Notes 4 and 5 of
Notes to Financial Statements for additional information.
In July 1996, the Partnership sold the Mallard Cove Apartments for a sales
price of $7,850,000. From the proceeds, the Partnership paid $3,962,005 in full
satisfaction of the first mortgage loan and paid $421,826 in selling costs.
The Partnership received net proceeds of $3,466,169. Pursuant to the terms of
the sale, the Partnership was required to hold back $500,000 of the sale
proceeds until October 1996. The full amount of the holdback was released in
October 1996. See Note 4 of Notes to Financial Statements for additional
information.
In October 1996, the Partnership sold the Knollwood Village Apartments for a
sales price of $22,250,000. From the proceeds of the sale, the Partnership paid
$12,810,259 to the third party mortgage holder in full satisfaction of the
first mortgage loan and paid $1,151,082 in selling costs which includes
$347,632 of prepayment penalties. The Partnership received net proceeds of
$8,288,659. The proceeds will be distributed to Limited Partners in the first
quarter of 1997. See Note 6 of Notes to Financial Statements for additional
information.
In October 1996, the Partnership paid $3,696,770 ($70.00 per Interest)
representing the regular quarterly distribution of Net Cash Receipts of $5.00
per Interest for the third quarter of 1996 and a special Net Cash Proceeds
distribution of $65.00 per Interest from the Mallard Cove Apartments sale. The
level of the regular quarterly Net Cash Receipts distribution is consistent
with that of the prior quarter. After the Knollwood Apartments sales proceeds
are distributed in January 1997, the Partnership will most likely discontinue
regular quarterly distributions due to the minimum amount of cash flow that the
<PAGE>
Partnership receives from Canyon Point Apartments. At such time as Canyon
Point Apartments is sold, the net sales proceeds will be distributed to the
Limited Partners. Including the October 1996 distribution, Limited Partners
have received distributions of Net Cash Receipts totaling $285.50 and Net Cash
Proceeds totaling $254.50 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.
The Canyon Point Apartments is owned through the use of third-party mortgage
loan financing and, therefore, the Partnership is subject to the financial
obligations required by this loan. As a result of the General Partner's efforts
to modify and refinance this loan, the loan does not mature until 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.
BALCOR EQUITY PROPERTIES - XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------------
On August 30, 1996, a proposed class action complaint was filed, Lenore Klein
vs. Lehman Brothers, Inc., et al. (Superior Court of New Jersey, Law Division,
Union County, Docket No. Unn-L-5162-96). The Partnership, additional limited
partnerships which were sponsored by The Balcor Company (together with the
Partnership, the "Affiliated Partnerships"), American Express Company, Lehman
Brothers, Inc., additional limited partnerships sponsored by the predecessor of
Lehman Brothers, Inc. (together with the Partnership and the Affiliated
Partnerships, the "Defendant Partnerships") and Smith Barney Holdings, Inc. are
the named defendants in the action. The complaint was amended on October 18,
1996 to add additional plaintiffs. The amended complaint alleges, among other
things, common law fraud and deceit, negligent misrepresentation, breach of
contract, breach of fiduciary duty and violation of certain New Jersey statutes
relating to the disclosure of information in the offering of limited
partnership interests in the Defendant Partnerships. The amended complaint
seeks judgment for compensatory damages equal to the amount invested in the
Defendant Partnerships by the proposed class plus interest accrued thereon;
general damages for injuries arising from the defendants' actions;
equitable relief, including rescission, on certain counts; punitive
damages; treble damages on certain counts, recovery from the defendants of all
profits received by them as a result of their actions relating to the Defendant
Partnerships; attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. Management of each of the defendants believes they
have meritorious defenses to contest the claims. It is not determinable at this
time whether or not an unfavorable decision in this action would have a
material adverse impact on the Partnership.
<PAGE>
Item 5. Other Information
- --------------------------------
Canyon Point Apartments
- -------------------------------
As previously reported, on August 2, 1996, the Partnership contracted to sell
Canyon Point Apartments, San Antonio, Texas, to an unaffiliated party, ERP
Operating Limited Partnership, an Illinois limited partnership, for a sale
price of $7,600,000. On September 6, 1996, the purchaser exercised its option
to terminate the agreement of sale. Pursuant to the agreement of sale, the
earnest money previously deposited by the purchaser and interest accrued
thereon has been returned to the purchaser.
Knollwood Village Apartments
- ----------------------------
As previously reported, on July 27, 1996, the Partnership contracted to sell
Knollwood Village Apartments, Grand Blanc, Michigan, to Lautrec A. & D.,
L.L.C., a Michigan limited liability company ("Lautrec"). The Partnership and
Lautrec agreed to reduce the sale price to $22,250,000. In addition, Lautrec
assigned its rights under the agreement of sale to an affiliate, Knollwood
Village Associates, a Michigan limited partnership. The sale closed on October
1, 1996. From the proceeds of the sale, the Partnership repaid the outstanding
balance of the first mortgage loan of $12,810,259 and paid a prepayment penalty
of $347,632, $445,000 to an unaffiliated party as a brokerage commission,
$166,875 to an affiliate of the third party providing property management
services for the property as a fee for services rendered in connection with the
sale of the property and $191,575 in closing costs. The Partnership received
the remaining proceeds of $8,288,659.
<PAGE>
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 September 30, 1992 (Commission File No.
0-13357) are incorporated herein by reference.
(10)(a) Agreement of Sale and attachment thereto relating to the sale of the
101 Marietta Tower office building previously filed as Exhibit (2) to the
Registrants Current Report on Form 8-K dated December 19, 1995 is incorporated
herein by reference.
(b)(i) Agreement of Sale and attachment thereto relating to the sale of the
Mallard Cove Apartments previously filed as Exhibit 2 to the Registrant's
Current Report on Form 8-K dated April 23, 1996 is incorporated herein by
reference.
(ii) Master Amendment and Agreement dated May 22, 1996 relating to the sale of
Mallard Cove Apartments, Greenville, South Carolina, previously filed as
Exhibit (10)(b)(ii) to the Partnership's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 is incorporated herein by reference.
(iii) Master Amendment and Agreement #2 dated May 22, 1996 relating to the sale
of Mallard Cove Apartments, Greenville, South Carolina, previously filed as
Exhibit (10)(b)(iii) to the Partnership's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 is incorporated herein by reference.
(c)(i) Agreement of Sale and attachment thereto relating to the sale of the
Canyon Point Apartments, previously filed as Exhibit (10)(c) to the
Partnership's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996
is incorporated herein by reference.
(ii) Letter Agreement dated August 9, 1996 relating to the sale of the Canyon
Point Apartments, San Antonio, Texas, is attached hereto.
(iii) Letter Agreement dated August 25, 1996 relating to the sale of the Canyon
Point Apartments, San Antonio, Texas, is attached hereto.
(iv) Notice of Disapproval of Sale dated September 6, 1996 relating to the
contract for sale of the Canyon Point Apartments, San Antonio, Texas is
attached hereto.
<PAGE>
(d)(i) Agreement of Sale and attachment thereto relating to the sale of the
Knollwood Village Apartments, Grand Blanc, Michigan, previously filed as
Exhibit (10)(d) to the Partnership's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 is incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of Knollwood
Village Apartments, Grand Blanc, Michigan, is attached hereto.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1996 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended September 30, 1996.
<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/ Jayne A. Kosik
----------------------------------
Jayne A. Kosik
Vice President, and Chief Financial
Officer (Principal Accounting Officer)
of Balcor Equity Partners - XVIII,
the General Partner
Date: November 14, 1996
---------------------
<PAGE>
August 9, 1996
VIA FACSIMILE MAIL
Valley Point Partners The Balcor Company Daniel J. Perlman, Esq.
Limited Partnership 2355 Waukegan Road Katten Muchin & Zavis
c/o The Balcor Company Suite A200 Suite 2100
2355 Waukegan Road Bannockburn, IL 60015 525 W. Monroe Street
Suite A200 Attn.: Al Lieberman Chicago, IL 60661
Bannockburn, IL 60015
Attn.: Ilona Adams
Re: Agreement of Sale, dated as of the 2nd day of August, 1996
(the "Agreement") between Valley Point Partners Limited Partnership,
as Seller, and ERP Operating Limited Partnership, as Purchaser, for
the purchase of Canyon Pointe Apartments, San Antonio, Texas
(the "Property").
Dear Ms. Adams and Messrs. Lieberman and Perlman:
Purchaser hereby requests that the Closing Date, as such term is defined
in Section 8 of the Agreement, be changed from September 16, 1996 to September
17, 1996. Please acknowledge Seller's acceptance of this modification to the
Agreement by executing this letter in the space provided below and returning it
via facsimile mail to Purchaser.
ERP OPERATING LIMITED PARTNERSHIP,
an Illinois limited partnership
By: Equity Residential Properties Trust,
a Maryland Real Estate Investment
Trust, its general partner
By: /s/ Shelley L. Dunck
------------------------------------
Shelley L. Dunck
Vice President
Approved and Accepted this day of August, 1996
VALLEY POINT PARTNERS LIMITED PARTNERSHIP, an Illinois
limited partnership
By: Valley Point Partners, Inc.,
an Illinois corporation
By: /s/ James E. Mendelson
-----------------------------------
James E. Mendelson
Authorized Representative
<PAGE>
August 25, 1996
VIA FACSIMILE MAIL
Valley Point Partners The Balcor Company Daniel J. Perlman, Esq.
Limited Partnership 2355 Waukegan Road Katten Muchin & Zavis
c/o The Balcor Company Suite A200 Suite 2100
2355 Waukegan Road Bannockburn, IL 60015 525 W. Monroe Street
Suite A200 Attn.: Al Lieberman Chicago, IL 60661
Bannockburn, IL 60015
Attn.: Ilona Adams
Re: Agreement of Sale, dated as of the 2nd day of August, 1996
(the "Agreement") between Valley Point Partners Limited Partnership,
as Seller, and ERP Operating Limited Partnership, as Purchaser, for
the purchase of Canyon Pointe Apartments, San Antonio, Texas
(the "Property").
Dear Ms. Adams and Messrs. Lieberman and Perlman:
Purchaser hereby requests an extension of the Approval Period, as such
term is defined in Section 16(A) of the Agreement from September 5, 1996 until
5:00 p.m. CDT on September 19, 1996. Purchaser further requests that the
Closing Date, as such term is defined in Section 8 of the Agreement, be changed
from September 19, 1996 to September 26, 1996. Please acknowledge Seller's
acceptance of this modification to the Agreement by executing this letter in
the space provided below and returning it via facsimile mail to Purchaser.
ERP OPERATING LIMITED PARTNERSHIP,
an Illinois limited partnership
By: Equity Residential Properties Trust,
a Maryland Real Estate Investment Trust,
its general partner
By: /s/ Shelley L. Dunck
------------------------------------
Shelley L. Dunck
Vice President
Approved and Accepted this day of August, 1996
VALLEY POINT PARTNERS LIMITED PARTNERSHIP,
an Illinois limited partnership
By: Valley Point Partners, Inc.,
an Illinois corporation
By: /s/ Jerry M. Ogle
-----------------------------------
Name: Jerry M. Ogle
-----------------------------------
Title: Vice President and Secretary
-----------------------------------
<PAGE>
NOTICE OF DISAPPROVAL
September 6, 1996
VIA FACSIMILE AND
CERTIFIED MAIL
Valley Point Partners The Balcor Company Daniel J. Perlman, Esq.
Limited Partnership 2355 Waukegan Road Katten Muchin & Zavis
c/o The Balcor Company Suite A200 Suite 2100
2355 Waukegan Road Bannockburn, IL 60015 525 W. Monroe Street
Suite A200 Attn: Alan G. Lieberman Chicago, IL 60661
Bannockburn, IL 60015
Attn: Ilona Adams
Re: Agreement of Sale, dated as of the 2nd day of August, 1996
(the "Agreement") between Valley Point Partners Limited Partnership,
as Seller, and ERP Operating Limited Partnership, as Purchaser, for
the purchase of Canyon Point Apartments, San Antonio, Texas (the
"Property").
Dear Ms. Adams and Messrs. Lieberman and Perlman:
Pursuant to Section 16(C) of the Agreement, we hereby give you notice that
we disapprove the Documents and the condition of the Property and as the
Property is unsuitable for our purposes, we are hereby terminating the
Agreement and all rights and obligations of the Seller and Purchaser
thereunder. By execution of this Notice of Disapproval, we are hereby
authorizing and directing Partners Title Company, as Escrow Agent, to disburse
the Earnest Money, plus all accrued interest, to us via the attached wire
instructions.
ERP OPERATING LIMITED PARTNERSHIP,
an Illinois limited partnership
By: Equity Residential Properties Trust,
a Maryland Real Estate Investment Trust,
its general partner
By: /s/ Lori P. Shelsted
------------------------------------
Lori P. Shelsted
Vice President
<PAGE>
Seller's Authorization for Release of Earnest Money
to Purchaser gived this 6th day of September, 1996
VALLEY POINT PARTNERS LIMITED PARTNERSHIP, an Illinois
limited partnership
By: Valley Point Partners, Inc., an Illinois corporation
By: /s/ James E. Mendelson
------------------------------------
Name: James E. Mendelson
Title: Authorized Rep.
NOTICE OF TERMINATION
State of Illinois )
) SS.
County of Cook )
The undersigned, having been first duly sworn, does hereby affirm, depose
and state that the undersigned is terminating tht certain Agreement of Sale
between the undersigned and Valley Point Partners Limited Partnership in
accordance with its terms for the following reasons.
Purchaser is terminating the Agreement of Sale pursuant to Section 16 (C)
thereof.
The undersigned demands return of all earnest money deposited under the
Agreement pursuant to its right therein.
IN WITNESS WHEREOF, the undersigned has executed this Affidavit on this
6th day of September, 1996.
ERP OPERATING LIMITED PARTNERSHIP,
an Illinois limited partnership
By: /s/ Lori P. Shelsted
--------------------------------------
Name: Lori P. Shelsted
Title: Vice President
Subscribed and sworn to before me, a Notary
Public in and for said County and State.
/s/ Deborah A. Slepawic
- ----------------------------------
Notary Public
SEAL
<PAGE>
FIRST AMENDMENT
TO
AGREEMENT OF SALE
THIS AGREEMENT, made and entered into as of the 16th day of August, 1996,
by and between LAUTREC A. & D., L.L.C., a Michigan limited liability company,
on behalf of an entity to be formed ("Purchaser"), and KNOLLWOOD VILLAGE
PARTNERS, an Illinois limited partnership ("Seller"), amends that certain
Agreement of Sale between Purchaser and Seller dated July 27, 1996 (the
"Agreement"), as follows:
1. Paragraph 1 is amended such that the Purchase Price shall be Twenty
Two Million Two Hundred Fifty Thousand ($22,250,000) Dollars.
2. Paragraph 4.1 is amended to read as follows:
In addition to the costs set forth in Paragraphs 3.1 and 3.2,
Seller shall pay for the cost of the documentary stamps and transfer
taxes to be paid with reference to the "Deed" (hereinafter defined) and
Purchaser and Seller shall each pay for one-half (1/2) of all other
intangible, recording, sales tax and surtax imposed by law with
reference to any other sale documents delivered in connection with the
sale of the Property to Purchaser and all other charges of the Title
Insurer in connection with this transaction.
3. Paragraph 26 is amended such that the Purchase Price shall be
allocated as follows:
Land, buildings & personal property 19,750,000
Noncompetitive Covenant 1,000,000
Goodwill 1,500,000
--------------------
22,250,000
4. Paragraph 27.1 is amended to read as follows:
Seller will cooperate with Purchaser, at no cost to Seller, in
cancelling any service contracts which may be canceled in accordance
with their terms if Purchaser so elects. Seller shall not amend or
extend any service contract between the date hereof and the date of
closing without the prior written consent of Purchaser.
5. Except as modified herein, the Agreement shall remain in full force
and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the date first set forth above.
PURCHASER SELLER
LAUTREC A&D, L.L.C. KNOLLWOOD VILLAGE PARTNERS
By: Knollwood Village, Inc.,
its General Partner
By: /s/ Spencer M. Partrich By: /s/ James E. Mendelson
--------------------------- -----------------------------
Spencer M. Partrich, Member Jim Mendelson
Authorized Agent
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5083
<SECURITIES> 0
<RECEIVABLES> 77
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6262
<PP&E> 29968
<DEPRECIATION> 16825
<TOTAL-ASSETS> 19701
<CURRENT-LIABILITIES> 487
<BONDS> 17925
0
0
<COMMON> 0
<OTHER-SE> 1289
<TOTAL-LIABILITY-AND-EQUITY> 19701
<SALES> 0
<TOTAL-REVENUES> 7975
<CGS> 0
<TOTAL-COSTS> 3078
<OTHER-EXPENSES> 1542
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1469
<INCOME-PRETAX> 1886
<INCOME-TAX> 0
<INCOME-CONTINUING> 1886
<DISCONTINUED> 0
<EXTRAORDINARY> 698
<CHANGES> 0
<NET-INCOME> 2584
<EPS-PRIMARY> 48.45
<EPS-DILUTED> 48.45
</TABLE>
