UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
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Balcor Equity Properties-XVIII A Real Estate Limited Partnership (the
"Registrant") is a limited partnership formed in 1984 under the laws of the
State of Illinois. The Registrant raised $52,811,000 from sales of Limited
Partnership Interests. The Registrant's operations consist exclusively of
investment in and operation of income-producing real property, and all
financial information included in this report relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire four real property
investments and a minority joint venture interest in one additional property.
The property in which the Registrant held a minority joint venture interest was
sold in December 1994 and the Registrant sold 101 Marietta Tower in February
1996. The Registrant owns the remaining properties described under "Properties"
(Item 2). The Partnership Agreement generally provides that the proceeds of any
sale or refinancing of the Registrant's properties will not be reinvested in
new acquisitions.
Overall, the investment real estate market saw gradual improvement over the
last year. This improvement has taken place in an environment of generally low
interest rates and little or no new supply, parameters which may not exist in
the next few years. Demand for real estate space, while projected to improve in
line with the overall economy, is also vulnerable to external forces. The major
challenges facing the real estate industry today include increased
international competition, corporate restructurings, new computer and
communications technologies, an aging population and potential revisions of
the tax code. In addition, the increased flow of capital to real estate through
new vehicles such as commercial mortgage-backed securities and REITs could spur
new construction at unsupportable levels, as well as impact existing property
values.
Operationally, existing apartment properties continued to register occupancy
percentages in the 90s, with average rents rising at an annual rate of between
3 and 4 percent. Apartments are still considered one of the top real estate
asset classes in terms of performance. However, some markets are experiencing
new construction of rental units which, if unrestrained, could impact the
performance of existing properties. Most of the new construction is aimed at
the two segments of the rental market which are growing the fastest: low-income
households and upper-income households who prefer to rent rather than own. Of
all the major asset classes, apartments typically display the least volatility
in terms of property values.
The General Partner had previously advised Limited Partners that its strategy
was to sell the Registrant's remaining properties over the next two to three
year period. The General Partner also stated that the timing of the liquidation
could be lengthened or shortened due to changes in market conditions, economic
factors, interest rates and unforeseen events. The General Partner now believes
that the market for multifamily housing properties has become increasingly
favorable to sellers of these properties. If current market conditions for
sales remain favorable, the liquidation of the Registrant's properties may be
accelerated.
<PAGE>
The Registrant received notice of unsolicited offers for the purchase of
limited partnership interests ("tender offers") in August and November 1995.
The tender offers were made by Equity Resource Fund-XVII ("Equity Resources").
Equity Resources stated that their primary motive in making the offers was to
make a profit from the purchase of the interests. Equity Resources acquired
2.38% of the total interests outstanding in the Registrant pursuant to the
tender offers. The Registrant incurred administrative costs in responding to
the tender offers and may incur additional costs if additional tender offers
are made in the future. The General Partner cannot predict with any certainty
what the impact of these tender offers or any future tender offers will have on
the operations of the Registrant.
The Registrant sold 101 Marietta Tower in February 1996. See Other Information
below, Item 7. Liquidity and Capital Resources and Note 10 of Notes to
Financial Statements for additional information.
The Registrant, by virtue of its ownership of real estate, is subject to
federal and state laws and regulations covering various environmental issues.
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental issues and to conduct tests for
environmental contamination as appropriate. The General Partner is not aware of
any potential liability due to environmental issues or conditions that would be
material to the Registrant.
The officers and employees of Balcor Equity Partners-XVIII, the General Partner
of the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Other Information
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101 Marietta Tower
- -------------------
In 1984, the Registrant acquired the 101 Marietta Tower office complex and a
leasehold interest in 200 parking spaces in the parking garage across the
street (together, the "Property") utilizing $20,595,745 of offering proceeds.
The Property was purchased subject to a first mortgage loan in the amount of
$20,000,000.
On December 19, 1995, the Registrant contracted to sell the Property for a sale
price of $29,500,000 to an unaffiliated party, Lennar Partners, Inc., a Florida
corporation ("Lennar"). The sale price was subsequently reduced to $26,000,000.
Lennar assigned its rights as purchaser under the contract and on February 12,
1996, the Property was acquired by Leisure Colony Management Corp., a Florida
corporation which is an affiliate of Lennar (the "Purchaser"). The Purchaser
acquired the Property subject to the first mortgage loan which had an
outstanding principal balance of approximately $17,350,000 at closing.
<PAGE>
From the proceeds of the sale, the Registrant paid a brokerage commission of
$260,000 to an affiliate of the company which provides property management
services at the Property (the "Broker"). An affiliate of the Broker is also a
principal of the Purchaser. The Registrant also paid closing and other sale
costs of approximately $206,000 and received the remaining sale proceeds of
$8,184,000. In addition, the contract provided that in the event the purchaser
receives certain payments in the future from the principal tenant of the
Property relating to reimbursements for certain operating expenses, the
Registrant was entitled to receive 25% of these payments. This percentage has
been increased to 75% by the parties. The General Partner was reimbursed by the
Registrant for its actual expenses incurred in connection with the sale.
Item 2. Properties
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The Registrant owns the three properties described below:
Location Description of Property
- -------- -----------------------
San Antonio, Texas Canyon Point Apartments: a 214-unit apartment
complex located on approximately 9 acres.
Greenville, South Carolina Mallard Cove Apartments (formerly Hidden Lakes):
a 211-unit apartment complex located on
approximately 15 acres.
Grand Blanc, Michigan Knollwood Village Apartments: a 648-unit
apartment complex located on approximately 55
acres.
Each of the above properties is held subject to various mortgages and other
forms of financing.
In the opinion of the General Partner, the Registrant has provided adequate
insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding real property
investments.
<PAGE>
Item 3. Legal Proceedings
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Proposed class action
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On February 29, 1996, a proposed class action complaint was filed, Raymond
Masri vs. Lehman Brothers, Inc., et al., Case No. 96/103727 (Supreme Court of
the State of New York, County of New York). The Registrant, additional limited
partnerships which were sponsored by The Balcor Company, three limited
partnerships sponsored by the predecessor of Lehman Brothers, Inc. (together
with the Registrant and the affiliated partnerships, the "Defendant
Partnerships"), Lehman Brothers, Inc. and Smith Barney Holdings, Inc. are
defendants. The complaint alleges, among other things, common law fraud and
deceit, negligent misrepresentation and breach of fiduciary duty relating to
the disclosure of information in the offering of limited partnership interests
in the Defendant Partnerships. The 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; recovery from the defendants of all
profits received by them as a result of their actions relating to the Defendant
Partnerships; exemplary damages; 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 Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of the Limited Partners of the Registrant
during 1995.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
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Matters
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There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop; therefore, the
market value of the Limited Partnership Interests cannot reasonably be
determined. For information regarding previous distributions, see Financial
Statements, Statements of Partners' Capital and Item 7. Liquidity and Capital
Resources, below.
As of December 31, 1995, the number of record holders of Limited Partnership
Interests of the Registrant was 5,179.
Item 6. Selected Financial Data
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Year ended December 31,
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1995 1994 1993 1992 1991
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Total income $16,743,567 $16,740,793 $15,328,981 $13,535,576 $13,015,657
Provision for in-
vestment property
writedown 1,016,987 None None None None
Net income (loss) 1,240,270 885,014 (8,829) (1,754,481) (1,776,892)
Net income (loss) per
Limited Partner-
ship Interest 23.25 16.59 (.16) (32.89) (33.31)
Total assets 58,114,553 58,914,891 58,492,849 58,875,919 61,394,682
Mortgage notes
payable 39,475,209 40,078,625 39,289,424 39,415,967 39,861,120
Distributions per
Limited Partner-
ship Interest(A) 20.00 20.00 None None None
(A) No distributions of original capital were made in any of the last five
years.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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Operations
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Summary of Operations
- ---------------------
Improved operations at 101 Marietta Tower office complex and Knollwood Village
Apartments resulted in an increase in net income for Balcor Equity
Properties-XVIII A Real Estate Limited Partnership (the "Partnership") for 1995
as compared to 1994. This increase was offset by a provision recognized in
connection with the sale of the 101 Marietta Tower office complex. In 1994, the
Partnership recognized its share of the gain on the sale of Belmere Apartments,
in which it held a minority joint venture interest, which partially offset this
increase, and also resulted in net income for 1994 as compared to a slight net
loss during 1993. Further discussion of the Partnership's operations is
summarized below.
1995 Compared to 1994
- ---------------------
Due to higher average cash balances and interest rates, interest income on
short-term investments increased during 1995 as compared to 1994.
Belmere Apartments, in which the Partnership held a minority joint venture
interest, was sold during 1994. As a result of the gain recognized in
connection with the sale, the Partnership recognized income from participation
in joint venture with an affiliate in 1994.
A lower property assessment at the 101 Marietta Tower office complex
retroactive to the 1993 tax year, reduced real estate tax expense and resulted
in a refund of 1993 real estate taxes which was received and recognized as
other income in 1995.
The refinancing of the Knollwood Village Apartments mortgage note payable in
1994 required the payment of deferred expenses which are being amortized over
the term of the mortgage note payable. As a result, amortization expense
increased for 1995 as compared to 1994.
Due to lower tenant-related repairs and maintenance expenses and leasing costs
at the 101 Marietta Tower office complex in 1995 and the exterior painting of
the Canyon Point and Knollwood Village apartment complexes completed in 1994,
property operating expense decreased in 1995 as compared to 1994.
The lower property assessment at the 101 Marietta Tower office complex and a
lower tax rate at the Knollwood Village Apartments resulted in a decrease in
real estate taxes during 1995 as compared to 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 1994, resulting in additional management fees. This caused a
decrease in property management fees during 1995 as compared to 1994.
<PAGE>
Due to lower portfolio management fees, administrative expenses decreased
during 1995 as compared to 1994.
The 101 Marietta Tower office complex was sold in February 1996. At December
31, 1995, for financial statement purposes, the property was written down to an
amount equal to the February 1996 net sales proceeds received and the
Partnership recognized a provision for investment property writedown of
$1,016,987. See Note 10 of Notes to Financial Statements for additional
information.
1994 Compared to 1993
- ---------------------
Higher rental and/or occupancy rates at all of the Partnership's properties
resulted in an increase in rental income and property management fees for 1994
as compared to 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
operating and real estate tax expenses was made in late 1993. This
recalculation and subsequent collection of 1993 and 1994 reimbursements
resulted in an increase in service income and property management fees during
1994 when compared to 1993.
Due to higher cash balances and interest rates, interest income on short-term
investments increased during 1994 as compared to 1993.
As a result of the gain recognized in connection with the sale of Belmere
Apartments, the Partnership recognized income from participation in joint
venture with an affiliate in 1994 compared to a loss in 1993.
As a result of a prepayment penalty on the previous first mortgage loan, which
was recorded as interest expense, and a higher mortgage loan balance associated
with the Knollwood Village Apartments refinancing in June 1994, interest
expense on mortgage notes payable increased for 1994 as compared to 1993. This
increase was partially offset by the 1993 refinancing of the Canyon Point
Apartments' mortgage note at a lower interest rate.
The loan refinancings in 1993 related to Mallard Cove and Canyon Point
apartment complexes and in 1994 related to Knollwood Village Apartments
required the payment of certain expenses which are deferred and amortized over
the terms of the mortgage notes payable. As a result, amortization expense
increased for 1994 as compared to 1993.
As a result of higher insurance and janitorial expenses at the 101 Marietta
Tower office complex and higher insurance expense at the Canyon Point, Mallard
Cove and Knollwood Village apartment complexes, property operating expense
increased for 1994 as compared to 1993.
A lower property assessment at the 101 Marietta Tower office complex and a
decrease in tax rates at the Knollwood Village Apartments caused real estate
tax expense to decrease for 1994 as compared to 1993.
Due to higher portfolio management and accounting fees which were partially
offset by decreases in other professional and consulting fees, administrative
expenses increased slightly for 1994 as compared to 1993.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased as of December 31, 1995 as
compared to December 31, 1994 primarily due to improved operations at the
Partnership's properties. The Partnership's cash provided by operating
activities included the cash flow from operations of the Partnership's
properties and interest income received on short-term investments, which was
partially offset by administrative costs. The cash provided by investing
activities consisted of the final distribution received from the joint venture
which owned Belmere Apartments and represents the Partnership's share of sales
proceeds and fourth quarter 1994 property operations. The net cash used in
financing activities consisted of capital improvement escrow activity,
principal payments on mortgage notes payable and distributions to Limited
Partners.
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 four of the Partnership's properties have underlying debt. During
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. As of December 31, 1995, the
occupancy rates of the Partnership's residential properties ranged from 95% to
98%, while the occupancy rate at the 101 Marietta Tower office complex was 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 had previously advised Limited Partners that its strategy
was to sell the Partnership's remaining properties over the next two to three
year period. The General Partner also stated that the timing of the liquidation
could be lengthened or shortened due to changes in market conditions, economic
factors, interest rates and unforeseen events. The General Partner now believes
that the market for multifamily housing properties has become increasingly
favorable to sellers of these properties. If current market conditions for
sales remain favorable, the liquidation of the Partnership's properties may be
accelerated.
The 101 Marietta Tower office complex, which represented 50% of the
Partnership's original portfolio, was sold in February 1996 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. There will be a
special distribution consisting of the proceeds from the 101 Marietta Tower
office complex sale plus any excess cash reserves above an amount necessary to
protect against unforeseen events in the second quarter of 1996.
<PAGE>
In January 1991, quarterly distributions to Limited Partners were suspended due
to the March 1991 maturity of the Canyon Point mortgage note payable and the
pending December 1992 expiration of the GSA lease at 101 Marietta Tower office
complex. With the resolution of these issues, along with the refinancing of the
Mallard Cove mortgage note payable, the Partnership resumed quarterly
distribution to Limited Partners in January 1994. The Partnership made four
distributions of Net Cash Receipts totaling $20.00 per Interest in 1995 and
1994, respectively. See Statement of Partners' Capital for additional
information.
In January 1996, the Partnership paid $264,055 ($5.00 per Interest)
representing the quarterly distribution to Limited Partners for the fourth
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. Including the January
1996 distribution, Limited Partners have received distributions of Net Cash
Receipts totaling $120.50 and Net Cash Proceeds totaling $14.50 per $1,000
Interest, as well as certain tax benefits. In light of results to date and
current market conditions, there can be no assurance that investors will
recover all of their original investment.
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.
In February 1996, the Partnership sold 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
remaining proceeds of $8,181,086. See Note 10 of Notes to Financial Statements
and Item 1. Business - Other Information 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.
In 1995, the Financial Accounting Standards Board issued Statement No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" which established accounting standards for impairment of
long-lived assets and long-lived assets to be disposed of. This statement has
been adopted by the Partnership as of January 1, 1995, and did not have a
material impact on the financial position or results of operations of 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.
<PAGE>
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
See Financial Statements and Schedule in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
The net effect of the differences between the financial statements and the tax
returns is summarized as follows:
December 31, 1995 December 31, 1994
----------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
---------- --------- ---------- ---------
Total assets $58,114,553 $54,224,324 $58,914,891 $54,244,538
Partners' capital
(deficit):
General Partner (221,590) (219,628) (233,993) (237,302)
Limited Partners 16,881,697 13,719,433 16,710,050 13,025,947
Net income (loss):
General Partner 12,403 17,674 8,850 24,359
Limited Partners 1,227,867 1,749,706 876,164 760,804
Per Limited Part-
nership Interest 23.25 33.13 16.59 14.41
Item 9. Changes in and Disagreements with Accountants on Accounting and
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Financial Disclosure
- --------------------
On September 14, 1995 the Registrant approved the engagement of Coopers &
Lybrand L.L.P. as its independent auditors for the fiscal year ending December
31, 1995 to replace the firm of Ernst & Young LLP, who were dismissed as
auditors of the Registrant effective September 14, 1995. The General Partner of
the Registrant approved the change in auditors.
The reports of Ernst & Young LLP on the Registrant's financial statements for
the past two fiscal years did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles.
In connection with the audits of the Registrant's financial statements for each
of the two fiscal years ended December 31, 1994, and in the subsequent interim
period, there were not disagreements with Ernst & Young LLP on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of Ernst &
Young LLP would have caused Ernst & Young LLP to make reference to the matter
in their report.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
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(a) Neither the Registrant nor Balcor Equity Partners-XVIII, its General
Partner, has a Board of Directors.
(b, c & e) The names, ages and business experiences of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
----- --------
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Vice President Josette V. Goldberg
Senior Vice President Alan G. Lieberman
Senior Vice President, Chief Brian D. Parker
Financial Officer, Treasurer
and Assistant Secretary
Senior Vice President John K. Powell, Jr.
Thomas E. Meador (July 1947) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a Director of The Balcor Company. He is
also Senior Vice President of American Express Company and is responsible for
its real estate operations worldwide. Prior to joining Balcor, Mr. Meador was
employed at the Harris Trust and Savings Bank in the commercial real estate
division where he was involved in various lending activities. Mr. Meador
received his M.B.A. degree from the Indiana University Graduate School of
Business.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and is
responsible for due diligence analysis and real estate advisory services for
Balcor and American Express Company. He also has supervisory responsibility for
Balcor's environmental matters. Mr. Darragh received masters' degrees in Urban
Geography from Queen's University and in Urban Planning from Northwestern
University.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary
responsibility for all human resources matters. In addition, she has
supervisory responsibility for Balcor's MIS functions. Ms. Goldberg has been
designated as a Senior Human Resources Professional (SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
Balcor's property sales and capital markets functions. Mr. Lieberman is a
Certified Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and, as Chief Financial
Officer and Chief Accounting Officer, is responsible for Balcor's financial,
legal and treasury functions. He is a Director of The Balcor Company. Mr.
Parker is a Certified Public Accountant and holds an M.S. degree in Accountancy
from DePaul University.
<PAGE>
John K. Powell Jr. (June 1950) joined Balcor in September 1985 and is
responsible for portfolio and asset management matters relating to Balcor's
partnerships. Mr. Powell also has supervisory responsibility for Balcor's risk
management and investor services functions. He received a Master of Planning
degree from the University of Virginia. Mr. Powell has been designated a
Certified Real Estate Financier by the National Society for Real Estate Finance
and is a full member of the Urban Land Institute.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1995.
Item 11. Executive Compensation
- -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of Balcor Equity Partners-XVIII, the General
Partner. Certain of these officers receive compensation from The Balcor Company
(but not from the Registrant) for services performed for various affiliated
entities, which may include services performed for the Registrant. However, the
General Partner believes that any such compensation attributable to services
performed for the Registrant is immaterial to the Registrant. See Note 8 of
Notes to Financial Statements for the information relating to transactions with
affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.
(b) Balcor Equity Partners-XVIII and its officers and partners own as a group
the following Limited Partnership Interests of the Registrant:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership
Interests 100 Interests Less than 1%
Relatives and affiliates of the officers and partners of the General Partner do
not own any additional Interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
<PAGE>
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
(a & b) See Note 8 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
See Note 3 of Notes to Financial Statements for information relating to the
Partnership Agreement and the allocation of distributions and profits and
losses.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
- -------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements and Schedule in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership
set forth as Exhibit 3 to Amendment No. 2 to the Registrant's Registration
Statement on Form S-11 dated September 17, 1984 (Registration No. 2-89380) is
hereby incorporated herein by reference.
(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) Material Contracts
(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
Registrant's Report on Form 8-K dated December 19, 1995 (Commission File No.
0-13357) is incorporated herein by reference.
(b) Reinstatement of, and First Amendment To, Agreement of Sale relating to
the sale of the 101 Marietta Tower office building is attached hereto.
(16) Letter from Ernst & Young LLP dated September 19, 1995 regarding the
change in the Registrant's certifying accountant previously filed as Exhibit 16
to the Registrant's Report on Form 8-K/A dated October 27, 1995 (Commission
File No. 0-13357) is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1995 is attached hereto.
(b) Reports on Form 8-K:
(i) A Current Report of Form 8-K/A dated October 27, 1995, amending the
Current Report on Form 8-K dated September 19, 1995 reporting a change in
the Registrant's certifying public accountant, was filed (Commission File
No. 0-13357).
(ii) A Current Report on Form 8-K dated December 19, 1995 (Commission File
No. 0-13357) was filed relating to the contract for the sale of the 101
Marietta Tower office building.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedule: See Index to Financial Statements and
Financial Statement Schedule in this Form 10-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, 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/Brian D. Parker
-----------------------------------
Brian D. Parker
Senior Vice President, and Chief
Financial Officer (Principal
Accounting and Financial
Officer) of Balcor Equity
Partners-XVIII, the General Partner
Date: March 28, 1996
-----------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------- ----------------------------- -------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Equity
Partners-XVIII, the General
/s/Thomas E. Meador Partner March 28, 1996
- ---------------------- -------------
Thomas E. Meador
Senior Vice President, and Chief
Financial Officer (Principal
Accounting Officer and
Financial Officer) of Balcor
Equity Partners-XVIII, the
/s/Brian D. Parker General Partner March 28, 1996
- ---------------------- -------------
Brian D. Parker
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Report of Independent Auditors
Financial Statements:
Balance Sheets, December 31, 1995 and 1994
Statements of Partners' Capital, for the years ended December 31, 1995, 1994
and 1993
Statements of Income and Expenses, for the years ended December 31, 1995, 1994
and 1993
Statements of Cash Flows, for the years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1995
Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Equity Properties-XVIII
A Real Estate Limited Partnership:
We have audited the accompanying balance sheet and financial statement schedule
of Balcor Equity Properties-XVIII A Real Estate Limited Partnership (An
Illinois Limited Partnership) as of December 31, 1995 and the related
statements of partners' capital, income and expenses and cash flows for the
year then ended. These financial statements and financial statement schedule
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements and financial statement
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Equity Properties-XVIII
A Real Estate Limited Partnership (An Illinois Limited Partnership) at December
31, 1995, and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 23, 1996
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Balcor Equity Properties-XVIII:
A Real Estate Limited Partnership:
We have audited the accompanying balance sheet of Balcor Equity
Properties-XVIII A Real Estate Limited Partnership (An Illinois Limited
Partnership) as of December 31, 1994 and the related statements of partners'
capital, income and expenses and cash flows for each of the two years in the
period ended December 31, 1994. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did
not audit the financial statements of Balcor Equity Properties - XIV, an
affiliate, which is the majority joint venturer of the partnership which owned
the Belmere Apartments. The Partnership's share of the operating income (loss)
of this joint venture included in the accompanying 1994 and 1993 statements of
income and expenses was approximately $755,000 (principally due to the gain on
sale of the property owned) and ($77,000), respectively. The financial
statements of Balcor Equity Properties - XIV were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates
to the amounts included for the aforementioned investment in joint venture, is
based solely on the report of the other auditors
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of Balcor Equity Properties-XVIII A Real
Estate Limited Partnership at December 31, 1994 and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
March 1, 1995
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS
1995 1994
-------------- --------------
Cash and cash equivalents $ 10,008,666 $ 6,190,971
Escrow deposits 1,694,388 2,082,249
Accounts and accrued interest receivable 809,538 1,101,624
Prepaid expenses 178,688 58,398
Deferred expenses, net of accumulated
amortization of $233,092 in 1995
and $148,659 in 1994 476,297 560,730
-------------- --------------
13,167,577 9,993,972
-------------- --------------
Investment in real estate:
Land 10,331,853 10,514,910
Buildings and improvements 69,865,669 70,699,599
-------------- --------------
80,197,522 81,214,509
Less accumulated depreciation 35,250,546 32,293,590
-------------- --------------
Investment in real estate, net of
accumulated depreciation 44,946,976 48,920,919
-------------- --------------
$ 58,114,553 $ 58,914,891
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 204,221 $ 225,336
Due to affiliates 33,430 67,045
Accrued liabilities, principaly interest
and real estate taxes 1,539,679 1,853,632
Security deposits 201,907 214,196
Mortgage notes payable 39,475,209 40,078,625
-------------- --------------
Total liabilities 41,454,446 42,438,834
-------------- --------------
Limited Partners' capital (52,811
Interests issued and outstanding) 16,881,697 16,710,050
General Partner's deficit (221,590) (233,993)
-------------- --------------
Total partners' capital 16,660,107 16,476,057
-------------- --------------
$ 58,114,553 $ 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 PARTNERS' CAPITAL
for the years ended December 31, 1995, 1994 and 1993
Partners' Capital (Deficit) Accounts
-------------- -----------------------------
General Limited
Total Partner Partners
-------------- -------------- --------------
Balance at December 31, 1992 $ 16,656,092 $ (242,754) $ 16,898,846
Net loss for the year
ended December 31, 1993 (8,829) (89) (8,740)
-------------- -------------- --------------
Balance at December 31, 1993 16,647,263 (242,843) 16,890,106
Cash distributions to
Limited Partners (A) (1,056,220) (1,056,220)
Net income for the year
ended December 31, 1994 885,014 8,850 876,164
-------------- -------------- --------------
Balance at December 31, 1994 16,476,057 (233,993) 16,710,050
Cash distributions to
Limited Partners (A) (1,056,220) (1,056,220)
Net income for the year
ended December 31, 1995 1,240,270 12,403 1,227,867
-------------- -------------- --------------
Balance at December 31, 1995 $ 16,660,107 $ (221,590) $ 16,881,697
============== ============== ==============
(A) Summary of cash distributions per Interest:
1995 1994 1993
-------------- -------------- --------------
First Quarter $ 5.00 $ 5.00 None
Second Quarter 5.00 5.00 None
Third Quarter 5.00 5.00 None
Fourth Quarter 5.00 5.00 None
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 years ended December 31, 1995, 1994 and 1993
1995 1994 1993
-------------- -------------- --------------
Income:
Rental $ 12,939,827 $ 12,672,200 $ 12,334,913
Service 3,103,906 3,090,448 2,894,136
Interest on short-term
investments 472,679 223,412 99,932
Participation in income
of joint venture
with an affiliate 754,733
Other income 227,155
-------------- -------------- --------------
Total income 16,743,567 16,740,793 15,328,981
-------------- -------------- --------------
Expenses:
Interest on mortgage
notes payable 3,647,305 3,785,223 3,586,643
Depreciation 2,956,956 2,935,846 3,040,277
Amortization of deferred
expenses 84,433 67,939 28,958
Property operating 5,438,275 6,270,831 5,837,673
Real estate taxes 1,157,793 1,400,303 1,597,631
Property management fees 800,165 930,617 730,637
Administrative 401,383 465,020 439,444
Participation in loss of
joint venture with
an affiliate 76,547
Provision for investment
property writedown 1,016,987
-------------- -------------- --------------
Total expenses 15,503,297 15,855,779 15,337,810
-------------- -------------- --------------
Net income (loss) $ 1,240,270 $ 885,014 $ (8,829)
============== ============== ==============
Net income (loss) allocated
to General Partner $ 12,403 $ 8,850 $ (89)
============== ============== ==============
Net income (loss) allocated
to Limited Partners $ 1,227,867 $ 876,164 $ (8,740)
============== ============== ==============
Net income (loss) per Limited
Partnership Interest (52,811
issued and outstanding) $ 23.25 $ 16.59 $ (0.16)
============== ============== ==============
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 years ended December 31, 1995, 1994 and 1993
1995 1994 1993
-------------- -------------- --------------
Operating activities:
Net income (loss) $ 1,240,270 $ 885,014 $ (8,829)
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Provision for investment
property writedown 1,016,987
Participation in
(income) loss of
joint venture with
with an affiliate (754,733) 76,547
Depreciation 2,956,956 2,935,846 3,040,277
Amortization of deferred
expenses 84,433 67,939 28,958
Collection (accrual) of
recoverable expenses 1,509,618 (1,509,618)
Net change in:
Escrow deposits (87,700) (141,768) (908,628)
Accounts and accrued
interest receivable (190,143) (103,281) 100,938
Prepaid expenses (120,290) 96,810 230,298
Accounts payable (21,115) 65,145 (199,282)
Due to affiliates (33,615) (9,012) 4,187
Accrued liabilities (313,953) 35,732 (104,708)
Security deposits (12,289) 6,314 675
-------------- -------------- --------------
Net cash provided by
operating activities 4,519,541 4,593,624 750,815
-------------- -------------- --------------
Investing activities:
Capital contributions to
joint venture with
an affiliate (21,628) (25,117)
Distribution from joint
venture with an affiliate 482,229
Improvements to properties (333,283) (127,696)
-------------- -------------- --------------
Net cash provided by (used
in) investing activities 482,229 (354,911) (152,813)
-------------- -------------- --------------
<PAGE>
Financing activities:
Distributions to Limited
Partners (1,056,220) (1,056,220)
Repayment of mortgage notes
payable (11,700,000) (9,001,276)
Proceeds from refinancing of
mortgage note payable 13,000,000 9,300,000
Payment of deferred expenses (329,872) (269,517)
Release of capital
improvement escrow 668,946 172,331
Funding of capital
improvement escrow (193,385) (903,512)
Principal payments on
mortgage notes payable (603,416) (510,799) (425,267)
-------------- -------------- --------------
Net cash used in
financing activities (1,184,075) (1,328,072) (396,060)
-------------- -------------- --------------
Net change in cash and cash
equivalents 3,817,695 2,910,641 201,942
Cash and cash equivalents at
beginning of year 6,190,971 3,280,330 3,078,388
-------------- -------------- --------------
Cash and cash equivalents at
end of year $ 10,008,666 $ 6,190,971 $ 3,280,330
============== ============== ==============
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. Nature of the Partnership's Business:
Balcor Equity Properties-XVIII A Real Estate Limited Partnership (the
"Partnership") is engaged principally in the operation of residential and
commercial real estate located in various markets within the United States.
2. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) Depreciation expense is computed using the straight-line method. Rates used
in the determination of depreciation are based upon the following estimated
useful lives:
Years
-----
Buildings and improvements 18-30
Furniture and fixtures 5
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account.
(c) Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of". Under SFAS 121, the
Partnership records its investments in real estate at the lower of cost or fair
value, and periodically assesses, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimates the fair value of its properties by dividing the property's expected
net operating income by a risk adjusted rate of return which considers economic
and demographic conditions in the market. In the event the General Partner
determines an impairment in value has occurred, and the carrying amount of the
real estate asset will not be recovered, a provision is recorded to reduce the
carrying basis of the property to its estimated fair value. The General Partner
considers the method referred to above to result in a reasonable measurement
of a property's fair value, unless other factors affecting the property's value
indicate otherwise.
(d) Deferred expenses consist of refinancing fees which are amortized over the
terms of the respective agreements.
<PAGE>
(e) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Since quoted market prices are not available for the Partnership's
financial instruments, fair values have been based on estimates using present
value techniques. These techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, may not be realized in
immediate settlement of the instrument. Statement No. 107 does not apply to all
balance sheet items and excludes certain financial instruments and all
non-financial instruments such as real estate and investment in joint ventures
from its disclosure requirements.
(f) Cash and cash equivalents include all highly liquid investments with an
original maturity of three months or less. Cash equivalents primarily are held
or invested with one issuer of commercial paper.
(g) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
abatements and/or scheduled rent increases is recognized on a straight line
basis over the respective lease term. Service income includes reimbursements
from operating costs such as real estate taxes, maintenance and insurance and
is recognized as revenue in the period the applicable costs are incurred.
(h) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership loss or income in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(j) A reclassification has been made to the previously reported 1994 and 1993
financial statements to conform with the classification used in 1995. This
reclassification has not changed the 1994 and 1993 results.
3. Partnership Agreement:
The Partnership was organized in January 1984. The Partnership Agreement
provides for Balcor Equity Partners-XVIII to be the General Partner and for the
admission of Limited Partners through the sale of up to 100,000 Limited
Partnership Interests at $1,000 per Interest, 52,811 of which were sold on or
prior to July 31, 1985, the termination date of the offering.
All profits and losses of the Partnership are allocated 99% to the capital
accounts of the Limited Partners and 1% to the capital account of the General
Partner.
When and as cash distributions are made, 100% of the Net Cash Receipts will be
distributed to holders of Interests. The General Partner will not receive any
portion of Net Cash Receipts; however, there will be accrued for the benefit of
the General Partner an amount equal to 1% of Net Cash Receipts distributed to
holders of Interests, which will be paid only out of Net Cash Proceeds as a
part of the General Partner's distributive share on sale or refinancing of
properties.
<PAGE>
When the Partnership sells or refinances its properties, the Net Cash Proceeds
resulting therefrom which are available for distribution will be distributed
only to holders of Limited Partnership Interests until such time as they have
received an amount equal to their Original Capital plus a 6% per annum
non-compounded return. The remaining Net Cash Proceeds available for
distribution will be distributed 85% to holders of Limited Partnership
Interests and 15% to the General Partner, provided that the General Partner's
distributive share shall be further subordinated to the prior receipt by
Limited Partners of a Preferential Cumulative Distribution of their Original
Capital in the amount of 100% for Interests purchased prior to January 1, 1985
and 80% for Interests purchased thereafter.
4. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1995 and 1994 consisted of the
following:
Carrying Carrying Current Final
Property Amount of Amount of Inter- Matur- Periodic Estimated
Pledged as Notes at Notes at est ity Payment Balloon
Collateral 12/31/95 12/31/94 Rate Date Terms Payment
- -------------- ---------- ---------- ------ ------ ------- ----------
Apartment Complexes:
Canyon Point $ 5,149,774$ 5,193,774 8.59% 1998 $ 40,703 $ 5,022,000
Mallard Cove 3,976,029 4,007,623 9.01 2000 32,616 3,797,000
Knollwood
Village (A) 12,878,068 12,961,273 9.55 2004 109,786 11,737,000
Office Building:
101 Marietta
Tower (B) 17,471,338 17,915,955 10.00 2001 554,971 13,899,000
----------- -----------
$39,475,209 $40,078,625
=========== ===========
(A) In June 1994, this loan was refinanced. The interest rate increased from
9.00% to 9.55%, the maturity date was extended from December 1994 to July 2004
and the monthly payments increased from $87,750 to $109,786. A portion of the
proceeds from the new $13,000,000 first mortgage loan were used to repay the
existing first mortgage loan of $11,700,000.
(B) In February 1996, the property collateralizing this loan was sold subject
to the loan. See Note 10 for additional information.
During 1995, 1994 and 1993 the Partnership incurred interest expense on
mortgage notes payable of $3,647,305, $3,785,223 and $3,586,643 and paid
interest expense of $3,804,468, $3,968,746 and $3,949,717, respectively.
The Partnership's loans described above require current monthly payments of
principal and interest, except for the 101 Marietta Tower loan which requires
quarterly payments of principal and interest.
Real estate with an aggregate carrying value of $80,197,522 at December 31,
1995 was pledged as collateral for repayment of the mortgage notes.
<PAGE>
Maturities of the above mortgage notes payable during each of the next five
years are approximately as follows:
1996 $ 174,000
1997 191,000
1998 5,202,000
1999 167,000
2000 3,939,000
The maturities listed above do not include the 101 Marietta Tower loan. In
February, 1996 the property collateralizing this loan was sold subject to the
loan.
5. Management Agreements:
As of December 31, 1995, all of the properties owned by the Partnership are
under management agreements with a third-party management company. These
management agreements provide for annual fees of 5% of gross operating receipts
for the residential properties and 3% to 6% of gross operating receipts for 101
Marietta Tower.
6. Investment in Joint Venture with an Affiliate:
The Partnership owned a 25.6% joint venture interest in Belmere Apartments and
accounted for it under the equity method. In December 1994, the joint venture
sold the property for a sales price of $8,500,000. From the sales proceeds, the
joint venture repaid the first mortgage loan and other selling costs and
received approximately $1,755,000. In February 1995, the Partnership received a
distribution of $482,229 which represented its share of sales proceeds and
fourth quarter 1994 property operations. This amount was included in accounts
receivable in the financial statements at December 31,1994. The Partnership's
share of the gain on the sale is $949,032 and is included in "Participation in
income of joint venture with an affiliate" in 1994 and is partially offset by
the Partnership's share of operating losses through the sale date. During 1994
and 1993, the Partnership made capital contributions of $21,628 and $25,117,
respectively to the joint venture.
7. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, will differ from the
tax returns due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net income for 1995 in the financial statements is $489,877 more than the
tax income of the Partnership for the same period.
<PAGE>
8. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/95 12/31/94 12/31/93
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Property management fees None None $842,028 None $732,228 $58,502
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $46,607 $4,326 61,056 22,549 46,147 3,819
Data processing 12,337 525 30,712 5,868 20,772 4,578
Investor communica-
tions 6,127 None 18,801 5,524 18,181 1,505
Legal 24,805 3,699 12,405 6,419 12,347 1,022
Portfolio management 90,767 14,122 93,124 9,612 66,900 5,626
Other 10,317 1,502 12,405 17,073 12,142 1,005
Property sales 10,741 9,256 None None None None
The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program however; the General Partner is reimbursed
for program expenses. The Partnership paid premiums to the deductible insurance
program of $97,729, $118,333 and $80,847 for 1995, 1994 and 1993, respectively.
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed all
of the Partnership's properties until the affiliate was sold to a third party
in November 1994.
9. Fair Value of Financial Instruments:
The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1995 are as follows:
The carrying value of cash and cash equivalents, accounts and accrued interest
receivable and accounts payable approximates fair value.
Based on borrowing rates available to the Partnership at the end of 1995 for
mortgage loans with similar terms and maturities, the fair value of the
mortgage notes payable approximates the carrying value.
10. Subsequent Events:
(a) In January 1996, the Partnership paid a distribution of $264,055 ($5.00 per
Interest) to Limited Partners relating to the fourth quarter of 1995.
<PAGE>
(b) 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 $26,551,244
at December 31, 1995. As a result of the sale the property was written down to
an amount equal to the February 1996 net sales proceeds received and the
Partnership recognized a $1,016,987 provision for investment property writedown
in 1995.
The Partnership received rental income at 101 Marietta Tower office complex
from the leasing of office space under operating leases. During 1996, prior to
the sale, the Partnership received $593,900 of rental income related to
operating leases.
Approximately 83% of the space at 101 Marietta Tower office complex was leased
to General Service Administration ("GSA") and 50%, 47% and 48% of the
Partnership's total rental and service income recognized during 1995, 1994 and
1993, respectively, related to GSA.
(c) On February 29, 1996, a proposed class action complaint was filed, Raymond
Masri vs. Lehman Brothers, Inc., et al., Case No. 96/103727 (Supreme Court of
the State of New York, County of New York). The Partnership, additional limited
partnerships which were sponsored by The Balcor Company, three limited
partnerships sponsored by the predecessor of Lehman Brothers, Inc. (together
with the Partnership and the affiliated partnerships, the "Defendant
Partnerships"), Lehman Brothers, Inc. and Smith Barney Holdings, Inc. are
defendants. The complaint alleges, among other things, common law fraud and
deceit, negligent misrepresentation and breach of fiduciary duty relating to
the disclosure of information in the offering of limited partnership interests
in the Defendant Partnerships. The 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; recovery from the defendants of all
profits received by them as a result of their actions relating to the Defendant
Partnerships; exemplary damages; 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>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1995
<CAPTION>
Col. A Col. B Col. C Col. D
- --------------------- -------- -------------------- ---------------------------------
Initial Cost Cost Adjustments
to Partnership Subsequent to Acquisition
-------------------- ---------------------------------
Buildings Carrying Reduction
Encum- and Im- Improve- Costs of Basis
Description brances Land provements ments (c) (d)(e)
- --------------------- ------- -------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Canyon Point Apts.,
214-units in
San Antonio, TX (a) $ 800,000 $ 8,134,000 $ 135,362 $ 9,850 $ (249,068)
Mallard Cove Apts.,
211-units in
Greenville, SC (a) 600,000 7,952,550 28,719
Knollwood Village Apts.,
648-units in Grand
Blanc, MI (a) 1,285,210 19,485,000 333,041 34,626
101 Marietta Tower,
579,823-sq. ft. ofc.
bldg. in Atlanta, GA (a)(b) 7,840,000 32,095,745 2,692,986 36,488 $(1,016,987)
----------- ----------- ---------- -------- ---------
Total $10,525,210 $67,667,295 $3,161,389 $109,683 $(1,266,055)
=========== =========== ========== ======== =========
</TABLE>
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1995
(Continued)
<CAPTION>
Col. A Col. E Col. F Col. G Col. H Col. I
- ------------------- -------------------------------- -------- -------- ------ --------------
Gross Amounts at Which Life Upon
Carried at Close of Period Which Depre-
-------------------------------- ciation in
Buildings Accumulated Date Date Latest Income
and Im- Total Deprecia- of Con- Acq- Satement
Description Land provements (d)(e)(f) tion(f) struction uired is Computed
- ------------------- -------- ---------- ---------- --------- --------- ------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Canyon Point Apts.,
214-units in
San Antonio, TX $ 778,460 $ 8,051,684 $ 8,830,144 $ 3,440,209 1984 1984 (h)
Mallard Cove Apts.,
211-units in
Greenville, SC 602,011 7,979,258 8,581,269 3,301,763 1983 1985 (h)
Knollwood Village Apts.
648-units in Grand
Blanc, MI 1,287,287 19,850,590 21,137,877 12,394,579 (i) 1984 (h)
101 Marietta Tower,
579,823-sq. ft. ofc.
bldg. in Atlanta, GA 7,664,095 33,984,137 41,648,232 16,113,995 1974 1984 (h)
----------- ----------- ----------- -----------
Total $10,331,853 $69,865,669 $80,197,522 $35,250,546
=========== =========== =========== ===========
</TABLE>
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO SCHEDULE III
(a) See description of Mortgage Notes Payable in Note 4 of Notes to Financial
Statements.
(b) This property was sold in February 1996.
(c) Consists of legal fees, appraisal fees, title costs and other related
professional fees.
(d) Guaranteed income earned on properties under the terms of certain
management and guarantee agreements was recorded by the Partnership as a
reduction of the basis of the property to which the guaranteed income related.
(e) Represents a reduction of basis due to a permanent impairment of the asset
value (See Note 10)
(f) The aggregate cost of land for Federal income tax purposes is $10,537,326
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $71,381,388. The total of these is $81,918,714.
(g)Reconciliation of Real Estate
--------------------------------
1995 1994 1993
---------- ---------- ----------
Balance at beginning
of year $81,214,509 $80,881,226 $80,753,530
Additions during the year:
Improvements 333,283 127,696
Reductions during the year:
Impairments 1,016,987
----------- ----------- -----------
Balance at end of year $80,197,522 $81,214,509 $80,881,226
============ =========== ===========
Reconciliation of Accumulated Depreciation
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
Balance at beginning of year $32,293,590 $29,357,744 $26,317,467
Depreciation expense for
the year 2,956,956 2,935,846 3,040,277
------------ ----------- -----------
Balance at end of year $35,250,546 $32,293,590 $29,357,744
============ =========== ===========
<PAGE>
(h) Depreciation expense is computed based upon the following estimated useful
lives:
Years
-----
Buildings and improvements 18-30
Furniture and fixtures 5
(i) This apartment complex was completed in three phases from 1970 through
1973.
<PAGE>
REINSTATEMENT OF, AND FIRST AMENDMENT TO,
AGREEMENT OF SALE
This REINSTATEMENT OF, AND FIRST AMENDMENT TO, AGREEMENT OF SALE (this
"First Amendment"), is entered into as of this 2nd day of February, 1996, by
and between Lennar Partners, Inc., a Florida corporation ("Purchaser"), and
Marietta Tower Partners, an Illinois limited partnership ("Seller").
W I T N E S S E T H:
WHEREAS, Purchaser and Seller entered into that certain Agreement of Sale
dated as of December 19, 1995 (the "Agreement"), for the purchase and sale of
the real property commonly known as 101 Marietta Tower, Atlanta, Georgia, and
Seller's leasehold interest in the parking garage located at 79 Marietta
Street, Atlanta, Georgia (as more particularly described in the Agreement).
All capitalized words used but not otherwise defined herein shall have the
meanings ascribed thereto in the Agreement.
WHEREAS, Purchaser has heretofore delivered to Seller a Due Diligence
Termination Notice dated January 19, 1996 (the "Termination Notice"),
terminating the Agreement.
WHEREAS, Purchaser and Seller desire to reinstate and amend the Agreement
upon the terms and conditions more fully set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereby as
agree as follows:
1. The Agreement is hereby reinstated and shall remain in full force and
effect as if the Termination Notice had not been delivered, except that the
Agreement shall be modified by the terms and conditions hereinafter set forth.
2. Purchaser hereby acknowledges that the Inspection Period has expired
and hereby waives its right to terminate the Agreement pursuant to Paragraph
7.1.
3. Purchaser and Seller hereby acknowledge that the Ground Lessor
Consent and the Ground Lessor Estoppel required to be delivered under Paragraph
8 have been delivered. Purchaser covenants and agrees that in consideration
for the acceptance of the Ground Lessor Consent, Purchaser shall defend,
indemnify and hold Seller and Affiliates of Seller harmless from any and all
liability, cost and expense (including, without limitation, reasonable
attorneys' fees, court costs and costs of appeal) suffered by Seller or
Affiliates of Seller in connection with the Ground Lease, with respect to
matters arising or accruing with respect to the period from and after the
Closing Date.
<PAGE>
4. The first full sentence on Page 10 of the Agreement is deleted and
the following is inserted in lieu thereof: "If the Lender fails to deliver the
Lender Consent on or before February 12, 1996, (which Lender Consent shall be
in the form of the Lender Consent received from Lender dated January 23, 1996
with the following sentence added to the first full paragraph thereof: 'There
are no other or additional terms or conditions which govern or modify the Note
or the Lien'), then either Purchaser or Seller shall have the option, upon
written notice to the other, exercised no later than February 12, 1996, to
terminate this Agreement, in which case this Agreement shall become null and
void without further action of the parties and all Earnest Money theretofore
deposited into the escrow by Purchaser, together with interest accrued thereon,
shall be returned to Purchaser, and neither party shall have any further
liability to the other, except for those covenants and obligations which
expressly survive the termination of this Agreement."
5. The second full sentence on Page 10 of the Agreement is deleted and
the following is inserted in lieu thereof: "If this Agreement has not been
terminated by either party in accordance with this Agreement on or before
February 12, 1996, then the contingency shall have been waived and the parties
will proceed to Closing; provided, however, that in the event the contingency
is satisfied prior to February 12, 1996, either party may accelerate the
Closing Date upon two (2) business days' prior written notice to the other."
6. Purchaser hereby waives its right to terminate the Agreement pursuant
to Paragraph 11.2 and Purchaser hereby acknowledges that Seller has satisfied
the conditions contained therein.
7. The reference to "Twenty-Nine Million Five Hundred Thousand and
No/100 Dollars ($29,500,000)" contained in the second line of Paragraph 1 is
hereby deleted and inserted in lieu thereof is the following: "Twenty-Six
Million and No/100 Dollars ($26,000,000.00)".
8. Paragraph 2.1 of the Agreement is hereby deleted and the following is
inserted in lieu thereof: "Upon the reinstatement of this Agreement in
accordance with that certain Reinstatement of, and First Amendment to,
Agreement of Sale between Purchaser and Seller (the "First Amendment"), the sum
of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the "Earnest
Money"), to be held in escrow by and in accordance with the provisions of the
Escrow Agreement ("Escrow Agreement"), in the form attached to the First
Amendment as Exhibit A."
9. Paragraph 2.2 of the Agreement is hereby deleted in its entirety.
10. The reference to "January 19, 1996" contained in the first line of
Paragraph 9 is hereby deleted and inserted in lieu thereof is the following:
"February 14, 1996".
11. The reference to "seventy-five percent (75%) to Purchaser" and
"twenty-five percent (25%) to Seller" contained in penultimate line on Page 19
of the Agreement are hereby deleted and the following are inserted in lieu
thereof, respectively: "thirty percent (30%) to Purchaser" and "seventy
percent (70%) to Seller".
12. The following parenthetical is inserted after the first word of the
second line on Page 16 of the Agreement: "(including any unpaid amounts under
the Service Contracts for the month of December, 1995)".
<PAGE>
13. The following sentence is inserted before the penultimate word of the
fourth line on Page 16 of the Agreement: "All operating expenses, including,
without limitation, maintenance, repair and administrative expenses and
insurance costs, incurred after the Proration Date shall be paid by Purchaser."
14. The following new sentences shall be inserted before the fifth full
sentence on Page 16 of the Agreement: "Purchaser shall receive a credit at
closing for the second installment of ad valorem real estate taxes on the
Leasehold Property in the amount of $4,630.65; provided, however, that
Purchaser shall promptly refund said amount upon receipt from Republic Parking,
the subtenant under the Lease ("Republic"), of such amount. Purchaser shall
use reasonable, good faith efforts to obtain said amount from Republic.
Additionally, Purchaser shall receive a credit at Closing in the amount of
$18,615.96, which amount represents the final amounts due to the Government
under the G.S.A. Lease with respect to its Tenant Improvement Allowance."
15. The first sentence of Paragraph 16.6 is amended by adding the
following after the ultimate word therein: "and Seller and Purchaser
acknowledge and agree that in no event shall Purchaser be required or obligated
to institute a lawsuit against the Government to recover the Government
Reconciliation Payment; provided, however, that Seller shall retain the right
to institute an action against the Government for the collection of such
Government Reimbursement Payment."
16. The following sentence is inserted after the first sentence of
Paragraph 16.6: "Purchaser and Seller acknowledge and agree that in the event
Seller or Purchaser, respectively, institutes an action against the Government
to recover the Government Reconciliation Payment, the party initiating such
action shall bear all costs thereof, including, but not limited to, reasonable
attorneys' fees and costs; provided, however, in the event either party pursues
such an action against the Government with respect to collection of the
Government Reconciliation Payment all such reasonable costs shall be reimbursed
from any recovery and the remainder, if any, shall be distributed in proportion
to the percentages hereinafter set forth."
17. Notwithstanding any of the representations and warranties contained
in Paragraph 20.2, Purchaser acknowledges that Republic has entered into a
certain Commercial Lease Contract with Virgilio M. Reynante d/b/a Grace &
Leilani's Tropical Fruit Stand (the "Fruit Stand Lease"), and Purchaser hereby
waives any cause of action against Seller arising out of, or in connection
with, the Fruit Stand Lease.
18. The following is inserted after the first notice block for the Seller
on Page 22: (708) 267-1600, (708) 317-4462 (FAX)".
19. The following is inserted after the ultimate sentence of Paragraph
21: "Seller hereby acknowledges and agrees that Purchaser shall only be
required to assume those obligations under the Construction Contract for which
corresponding approval documentation from the Government exists for such
obligations; provided, however, that Seller shall have up to thirty (30) days
from Closing to provide such documentation or negotiate and document such
approval by the Government, in which event upon delivery of such approval
documentation to Purchaser by Seller, Purchaser shall promptly assume such
obligations and shall promptly remit to Seller the amount equal to the
associated profit payable to Seller pursuant to such approval documentation.
The provisions of this Paragraph 21 shall survive Closing and the delivery of
the Deed."
<PAGE>
20. Except as amended and modified hereby, the Agreement shall be and
remain unmodified and in full force and effect in accordance with its terms,
and each and every one of its provisions, as amended and modified by this First
Amendment, are hereby ratified and affirmed.
21. This First Amendment may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which, when taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the day and year first above written.
PURCHASER:
LENNAR PARTNERS, INC., a Florida corporation
By: /s/Mark A. Griffith
------------------------------------------
Name: Mark A. Griffith
------------------------------------------
Its: Vice President
------------------------------------------
SELLER:
MARIETTA TOWER PARTNERS, an Illinois limited
partnership
By: BALCOR EQUITY PARTNERS-XVIII, an Illinois general
partnership, its general partner
By: BALCOR EQUITY PARTNERS-XVIII, INC., a
general partner
By: /s/Philip Schechter
-------------------------------------
Name: Philip Schechter
-------------------------------------
Its: Authorized Agent
-------------------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 10009
<SECURITIES> 0
<RECEIVABLES> 810
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12691
<PP&E> 80198
<DEPRECIATION> 35251
<TOTAL-ASSETS> 58114
<CURRENT-LIABILITIES> 1979
<BONDS> 39475
0
0
<COMMON> 0
<OTHER-SE> 16660
<TOTAL-LIABILITY-AND-EQUITY> 58114
<SALES> 0
<TOTAL-REVENUES> 16743
<CGS> 0
<TOTAL-COSTS> 7396
<OTHER-EXPENSES> 3443
<LOSS-PROVISION> 1017
<INTEREST-EXPENSE> 3647
<INCOME-PRETAX> 1240
<INCOME-TAX> 0
<INCOME-CONTINUING> 1240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1240
<EPS-PRIMARY> 23.25
<EPS-DILUTED> 23.25
</TABLE>
