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 March 31, 1997
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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
----- -----
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1997 and December 31, 1996
(Unaudited)
ASSETS
1997 1996
-------------- --------------
Cash and cash equivalents $ 1,814,843 $ 10,272,801
Escrow deposits 153,428 263,326
Accounts and accrued interest receivable 85,384 100,430
Note receivable 19,127 31,878
Prepaid expenses 3,725 17,314
Deferred expenses, net of accumulated
amortization of $84,935 in 1997
and $79,273 in 1996 28,312 33,974
-------------- --------------
2,104,819 10,719,723
-------------- --------------
Investment in real estate:
Land 778,460 778,460
Buildings and improvements 8,051,683 8,051,683
-------------- --------------
8,830,143 8,830,143
Less accumulated depreciation 3,744,963 3,684,012
-------------- --------------
Investment in real estate, net of
accumulated depreciation 5,085,180 5,146,131
-------------- --------------
$ 7,189,999 $ 15,865,854
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 5,328 $ 44,904
Due to affiliates 96,876 98,947
Accrued liabilities, principally
real estate taxes 43,441 167,154
Security deposits 14,399 14,456
Mortgage note payable 5,089,204 5,101,842
-------------- --------------
Total liabilities 5,249,248 5,427,303
-------------- --------------
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1997 and December 31, 1996
(Unaudited)
1997 1996
-------------- --------------
Commitments and contingencies
Limited Partners' capital (52,811
Interests issued and outstanding) 2,102,401 10,501,057
General Partner's deficit (161,650) (62,506)
-------------- --------------
Total partners' capital 1,940,751 10,438,551
-------------- --------------
$ 7,189,999 $ 15,865,854
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Income:
Rental $ 311,744 $ 1,984,166
Service 4,602 154,578
Interest on short-term investments 44,355 205,597
-------------- --------------
Total income 360,701 2,344,341
-------------- --------------
Expenses:
Interest on mortgage notes payable 109,472 546,494
Depreciation 60,951 395,669
Amortization of deferred expenses 5,662 20,299
Property operating 242,693 729,493
Real estate taxes 50,052 353,537
Property management fees 15,919 162,465
Administrative 56,019 90,359
-------------- --------------
Total expenses 540,768 2,298,316
-------------- --------------
(Loss) income before gain on sale of
property and extraordinary item: (180,067) 46,025
Gain on sale of property 156,949
-------------- --------------
(Loss) income before extraordinary item
(180,067) 202,974
Extraordinary item:
Gain on extinguishment of debt 787,767
-------------- --------------
Net (loss) income $ (180,067) $ 990,741
============== ==============
(Loss) income before extraordinary item
allocated to General Partner $ (99,144) $ 2,030
============== ==============
(Loss) income before extraordinary item
allocated to Limited Partners $ (80,923) $ 200,944
============== ==============
(Loss) income before extraordinary item
per Limited Partnership Interest
(52,811 issued and outstanding) $ (1.53) $ 3.80
============== ==============
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Extraordinary item allocated to
General Partner None $ 7,878
============== ==============
Extraordinary item allocated to
Limited Partners None $ 779,889
============== ==============
Extraordinary item per Limited
Partnership Interest (52,811
issued and outstanding) None $ 14.77
============== ==============
Net (loss) income allocated to
General Partner $ (99,144) $ 9,908
============== ==============
Net (loss) income allocated to
Limited Partners $ (80,923) $ 980,833
============== ==============
Net (loss) income per Limited Partnership
Interest (52,811 issued and outstanding) $ (1.53) $ 18.57
============== ==============
Deemed distribution None $ 156,949
============== ==============
Distribution to Limited Partners $ 8,317,733 $ 264,055
============== ==============
Distribution per Limited Partnership
Interests (52,811 issued and outstanding) $ 157.50 $ 5.00
============== ==============
The accompanying notes are an integral part of the financial statement.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Operating activities:
Net (loss) income $ (180,067) $ 990,741
Adjustments to reconcile net (loss) income
to net cash (used in) or provided by
operating activities:
Gain on sale of property (156,949)
Gain on extinguishment of debt (787,767)
Depreciation of properties 60,951 395,669
Amortization of deferred expenses 5,662 20,299
Net change in:
Escrow deposits 109,898 682,676
Accounts and accrued interest
receivable 15,046 626,192
Notes receivable 12,751
Prepaid expenses 13,589 160,677
Accounts payable (39,576) (161,336)
Due to affiliates (2,071) 5,833
Accrued liabilities (123,713) (553,857)
Security deposits (57) (30,818)
-------------- --------------
Net cash (used in) or provided by
operating activities (127,587) 1,191,360
-------------- --------------
Investing activities:
Proceeds from sale of real estate 8,646,849
Costs incurred in connection with sale
of real estate (308,794)
--------------
Net cash provided by
investing activities 8,338,055
--------------
Financing activities:
Distribution to Limited Partners (8,317,733) (264,055)
Deemed distribution (156,949)
Release of capital improvement escrow 76,851
Funding of capital improvement escrow (44,550)
Principal payments on mortgage
notes payable (12,638) (160,207)
-------------- --------------
Net cash used in financing activities (8,330,371) (548,910)
-------------- --------------
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1997 and 1996
(Unaudited)
1997 1996
-------------- --------------
Net change in cash and cash equivalents (8,457,958) 8,980,505
Cash and cash equivalents at
beginning of period 10,272,801 10,008,666
-------------- --------------
Cash and cash equivalents at end of period $ 1,814,843 $ 18,989,171
============== ==============
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:
(a) The Partnership restated net income for the quarter ended March 31, 1996 as
a result of the reclassification of the state withholding tax paid in
connection with the sale of the 101 Marietta Tower office complex as a deemed
distribution. There was no change to partners' capital for the quarter ended
March 31, 1996 as a result of the reclassification.
(b) In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the quarter
ended March 31, 1997, and all such adjustments are of a normal and recurring
nature.
(c) For financial statement purposes, in previous years partners were allocated
income and loss in accordance with the profit and loss percentages in the
Partnership Agreement. In order for the capital accounts of the General
Partner and Limited Partners to appropriately reflect their respective
remaining economic interests as provided for in the Partnership Agreement, the
General Partner was allocated additional loss in 1997 for financial statement
purposes.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold three properties. Additionally,
the Partnership is actively marketing its only remaining property, the Canyon
Point Apartments, for sale. The timing of the termination of the Partnership
and final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. Such contingencies may
include legal and other fees stemming from litigation involving the Partnership
including, but not limited to, the lawsuits discussed in Note 6 of Notes to
Financial Statements. In the absence of any contingency, the reserves will be
paid within twelve months of the last property being sold. In the event a
contingency exists, reserves may be held by the Partnership for a longer period
of time.
3. Note Receivable:
In connection with the sale of the 101 Marietta Tower office complex, the
Partnership received a $54,558 promissory note for delinquent rent due from a
tenant at the complex. The note bore interest at a rate of 12.25% and was
payable in monthly installments of principal and interest through maturity in
December 1996. The former tenant did not pay the final installment on the note
when due. The former tenant owes one remaining payment of $6,376. The
Partnership will consider further action against the former tenant if the
remaining installment is not paid by June 30, 1997.
<PAGE>
4. Interest Expense:
During the quarters ended March 31, 1997 and 1996, the Partnership incurred
interest expense on mortgage notes payable of $109,472 and $546,494 and paid
interest expense of $109,472 and $944,079, respectively.
5. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1997 are:
Paid Payable
------------ ---------
Reimbursement of expenses to $8,828 $96,876
the General Partner, at cost:
6. Contingency:
The Partnership is currently involved in two lawsuits whereby the Partnership
and certain affiliates have been named as defendants alleging substantially
similar claims involving certain federal securities law violations with regard
to the adequacy and accuracy of disclosures of information concerning, as well
as marketing efforts related to, the offering of the Limited Partnership
Interests of the Partnership. The defendants continue to vigorously contest
these actions. A plaintiff class has not been certified in either action and,
no determinations of the merits have been made. It is not determinable at this
time whether or not an unfavorable decision in either action would have a
material adverse impact on the financial position, operations and liquidity of
the Partnership. The Partnership believes it has meritorious defenses to
contest the claims.
7. Subsequent Event:
In April 1997, the Partnership paid a distribution of $145,758 ($2.76 per
Interest) to holders of Limited Partnership Interests representing a special
Net Cash Proceeds distribution of remaining available sale proceeds from the
Knollwood Village Apartments sale.
<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 1996 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
Due to the three property sales in 1996, which were generating income from
operations prior to their sales, and a decrease in net income from the Canyon
Point Apartments as described below, the Partnership recognized a net loss in
1997 as compared to net income in 1996. In addition, an extraordinary gain on
extinguishment of debt was recognized in connection with the sale of 101
Marietta Tower Office complex in 1996. Further discussion of the Partnership's
operations is summarized below.
1997 Compared to 1996
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1997 and 1996 refer
to the quarters ended March 31, 1997 and 1996.
The Partnership sold the 101 Marietta Tower office complex, the Mallard Cove
Apartments and the Knollwood Village Apartments in February, July and October
1996, respectively. As a result, rental and service income, interest expense
on mortgage notes payable, depreciation expense, amortization expense, real
estate tax expense, and property management fees expense decreased during 1997
as compared to 1996. In addition, rental income also decreased due to lower
rental and occupancy rates at the Canyon Point Apartments.
The proceeds from the February 1996 sale of the 101 Marietta Tower office
complex were distributed to Limited Partners in April 1996. In addition, a
<PAGE>
majority of the proceeds from the October 1996 sale of the Knollwood Village
Apartments were distributed to Limited Partners in January 1997. As a result,
lower average cash balances were available for investment and interest income
decreased during 1997 as compared to 1996.
Property operating expense decreased by approximately $535,000 due to the three
property sales in 1996. This decrease was partially offset by an increase of
approximately $48,000 at the Canyon Point Apartments related to additional
repairs and maintenance expenses incurred in 1997 as compared to 1996.
Lower legal and portfolio management fees resulted in a decrease in
administrative expenses during 1997 as compared to 1996.
The Partnership recognized a gain in 1996 in connection with the sale of the
101 Marietta Tower office complex.
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 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.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership as of March 31, 1997 decreased by
approximately $8,458,000 as compared to December 31, 1996 primarily due to a
special distribution of $8,300,000 made to Limited Partners in January 1997.
Cash used in operating activities during 1997 consists primarily of the
operations of the Canyon Point Apartments, expenses paid in 1997 related to
properties sold in 1996 and the payment of administrative expenses which were
partially offset by interest income received on short-term investments. Net
cash used in financing activities consists primarily of an $8,317,733
distribution to Limited Partners from the available Knollwood Village
Apartments sale proceeds.
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. A deficit is considered significant if
it exceeds $250,000 annually or 20% of the property's rental and service
income. 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. The three properties which
were sold in 1996 all generated positive cash flow prior to their sales. The
Partnership's remaining property is subject to a third party mortgage loan
which matures in 1998. The Partnership expects to sell the property prior to
the maturity of the loan. During 1997, Canyon Point Apartments generated a
marginal cash flow deficit as compared to positive cash flow in 1996 due to a
decrease in rental and occupancy rates, and due to higher repairs and
maintenance expenses. As of March 31, 1997, the occupancy rate at the Canyon
Point Apartments was 91%.
<PAGE>
During 1996, the Partnership sold three properties. Additionally, the
Partnership is actively marketing its only remaining property, the Canyon Point
Apartments, for sale. The timing of the termination of the Partnership and
final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. Such contingencies may
include legal and other fees stemming from litigation involving the Partnership
including, but not limited to, the lawsuits discussed in Note 6 of Notes to
Financial Statements. In the absence of any contingency, the reserves will be
paid within twelve months of the last property being sold. In the event a
contingency exists, reserves may be held by the Partnership for a longer period
of time.
In April 1997, the Partnership paid $145,758 ($2.76 per Interest) representing
a special Net Cash Proceeds distribution from the remaining available Knollwood
Village Apartments sale proceeds. The Partnership has discontinued regular
quarterly distributions due to the minimal amount of cash flow received from
Canyon Point Apartments. When Canyon Point Apartments is sold, available Net
Cash Proceeds will be distributed to the Limited Partners. Including the April
1997 distribution, Limited Partners have received distributions of Net Cash
Receipts of $288.00 and Net Cash Proceeds of $412.26, totaling $700.26 per
$1,000 Interest, as well as certain tax benefits. In light of results to date
the General Partner does not anticipate that investors will recover all of
their original investment.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(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
Knollwood Village Apartments, Grand Blanc, Michigan, previously filed as
Exhibit (10)(d) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 is incorporated herein by reference.
(ii) First Amendment to the Agreement of Sale dated August 9, 1996 relating to
the sale of the Knollwood Village Apartments, Grand Blanc, Michigan, previously
filed as Exhibit (10)(d)(ii) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996 is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the quarter ending March 31,
1997 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended March 31, 1997.
<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
Managing Director and
Chief Financial Officer
(Principal Accounting Officer)
of Balcor Equity Partners
- XVIII, the General Partner
Date:May 13, 1997
------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1815
<SECURITIES> 0
<RECEIVABLES> 85
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2077
<PP&E> 8830
<DEPRECIATION> 3745
<TOTAL-ASSETS> 7190
<CURRENT-LIABILITIES> 160
<BONDS> 5089
0
0
<COMMON> 0
<OTHER-SE> 1941
<TOTAL-LIABILITY-AND-EQUITY> 7190
<SALES> 0
<TOTAL-REVENUES> 361
<CGS> 0
<TOTAL-COSTS> 309
<OTHER-EXPENSES> 123
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109
<INCOME-PRETAX> (180)
<INCOME-TAX> 0
<INCOME-CONTINUING> (180)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (180)
<EPS-PRIMARY> (1.53)
<EPS-DILUTED> (1.53)
</TABLE>
