UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(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, 1996
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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
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(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 ]
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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
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Due to the sales of the 101 Marietta Tower office complex, Mallard Cove
Apartments and Knollwood Village Apartments, in February, July and October
1996, respectively, Balcor Equity Properties-XVIII A Real Estate Limited
Partnership (the "Partnership") recognized a gain on sale of real estate in
1996 which resulted in a higher net income in 1996 as compared to 1995.
Improved operations at the 101 Marietta Tower office complex and the Knollwood
Village Apartments resulted in an increase in net income for the Partnership
for 1995 as compared to 1994. This increase was offset by a provision for
investment property write-down recognized in 1995 in connection with the sale
of the 101 Marietta Tower office complex in 1996. Further discussion of the
Partnership's operations is summarized below.
1996 Compared to 1995
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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, the Partnership recognized lower rental
income during 1996 as compared to 1995.
Due to the sales of the 101 Marietta Tower office complex, the Mallard Cove
Apartments and the Knollwood Village Apartments, the Partnership recognized
lower service income during 1996 as compared to 1995. In addition, a real
estate tax refund of $227,155 which was received in 1995 and recognized as
service income was subsequently refunded in 1996 to the General Service
Administration a tenant at the 101 Marietta Tower office complex, which further
reduced service income in 1996.
Due to the sales of the 101 Marietta Tower office complex, the Mallard Cove
Apartments and the Knollwood Village Apartments, the Partnership recognized
lower interest expense on mortgage notes payable during 1996 as compared to
1995.
Due to the sales of the 101 Marietta Tower office complex, the Mallard Cove
Apartments and the Knollwood Village Apartments, the Partnership recognized
lower depreciation expense during 1996 as compared to 1995.
Due to the sales of the 101 Marietta Tower office complex, the Mallard Cove
Apartments and the Knollwood Village Apartments, the Partnership recognized
lower amortization expense during 1996 as compared to 1995.
Due to the sales of the 101 Marietta Tower office complex, the Mallard Cove
Apartments and the Knollwood Village Apartments, the Partnership recognized
lower property operating expense during 1996 as compared to 1995.
<PAGE>
Due to the sales of the 101 Marietta Tower office complex, the Mallard Cove
Apartments and the Knollwood Village Apartments, the Partnership recognized
lower real estate tax expense during 1996 as compared to 1995.
Due to the sales of the 101 Marietta Tower office complex, the Mallard Cove
Apartments and the Knollwood Village Apartments, the Partnership recognized
lower property management fees during 1996 as compared to 1995.
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 net sales proceeds received from the sale and the
Partnership recognized a provision for investment property writedown of
$1,016,987.
The Partnership recognized gains on sales of real estate of $16,267,970 in
connection with the sales of the Mallard Cove Apartments and Knollwood Village
Apartments in 1996.
The purchaser of the 101 Marietta Tower office complex acquired the property in
February 1996 subject to the existing first mortgage loan. The Partnership
recognized an extraordinary gain on extinguishment of debt 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.
In connection with the sales of the Mallard Cove Apartments and Knollwood
Village Apartments, the Partnership wrote off the remaining unamortized
deferred expenses relating to the mortgage loans of $344,828 and paid a
prepayment penalty of $347,633. These items resulted in the recognition of
debt extinguishment expense in 1996.
1995 Compared to 1994
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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.
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.
<PAGE>
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.
Due to lower portfolio management fees, administrative expenses decreased
during 1995 as compared to 1994.
Liquidity and Capital Resources
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The cash position of the Partnership increased by approximately $264,000 as of
December 31, 1996 as compared to December 31, 1995. Cash flow of approximately
$1,625,000 was provided by operating activities during 1996 consisting
primarily of cash provided by the operation of the Partnership's properties and
interest income received on short-term investments which was partially offset
by the payment of administrative expenses and the payment of prepayment
penalties relating to certain property sales. The Partnership's investing
activities generated cash of approximately $37,881,000 from the sales of three
properties net of closing costs. Cash of approximately $39,242,000 was used in
financing activities primarily consisting of approximately $21,653,000 of
distributions to Limited Partners and the repayment of two mortgage notes
payable of approximately $16,772,000. In addition, in January 1997, the
Partnership made a special distribution of $8,185,705 to the Limited Partners
primarily from the proceeds received in connection with the sale of the
Knollwood Village Apartments.
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 Partnership's sole property owned at
December 31, 1996 generated positive cash flow in each of 1996 and 1995. The
101 Marietta Tower office complex, Mallard Cove Apartments and Knollwood
Village Apartments generated positive cash flow in 1995 and before they were
sold in February, July and October 1996, respectively. As of December 31,
1996, the occupancy rate at the Canyon Point Apartments was 93%.
Canyon Point Apartments is located in San Antonio, Texas, in the north central
sub-market. The apartment complexes in this area offer rental rates ranging
from moderate to upper end. Canyon Point's rents fall in the moderate
category. The 1996 average occupancy at the property was 91%; sub-market
occupancy for similar properties averaged 91%. The San Antonio multi-family
market is considered soft as a result of 6,000 new apartment units constructed
over the last three years with an additional 2,500 units anticipated for 1997.
Flat or declining rental rates are projected into the foreseeable future.
<PAGE>
The Canyon Point Apartments is owned through the use of third-party mortgage
loan financing and, therefore, the Partnership is subject to the financial
obligations required by this loan. The Partnership is currently marketing this
property for sale. The Partnership anticipates selling the property before the
loan matures in 1998.
During February, July and October 1996, the Partnership sold the 101 Marietta
Tower office complex, the Mallard Cove Apartments and the Knollwood Village
Apartments, respectively. Additionally, the Partnership is actively marketing
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 "Item 3. Legal Proceedings". 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 February 1996, the Partnership sold the 101 Marietta Tower office complex
for a sale price of $26,000,000. The purchaser of the 101 Marietta Tower office
complex took title subject to the existing first mortgage loan of $17,353,151.
From the proceeds of the sale, the Partnership paid $308,794 in selling costs.
The remainder of the proceeds were distributed to Limited Partners in April
1996. See Notes 10 and 11 of Notes to Financial Statements for additional
information.
In July 1996, the Partnership sold the Mallard Cove Apartments in an all cash
sale for $7,850,000. From the proceeds of the sale, the Partnership paid
$3,962,005 to the third party mortgage holder in full satisfaction of the first
mortgage loan, and paid $101,300 in selling costs. Pursuant to the terms of the
sale, the Partnership was required to hold back $500,000 of the sale proceeds
until October 1996. The full amount of the holdback was released in October
1996. The remainder of the proceeds were distributed to the Limited Partners in
October 1996. See Note 10 of Notes to Financial Statements for additional
information.
In October 1996, the Partnership sold the Knollwood Village Apartments in an
all cash sale for $22,250,000. From the proceeds of the sale, the Partnership
paid $12,810,259 to the third party mortgage holder in full satisfaction of the
first mortgage loan and paid $803,450 in selling costs and $347,632 of
prepayment penalties. The remainder of the proceeds were distributed to
Limited Partners in January 1997. See Note 10 of Notes to Financial Statements
for additional information.
The Partnership made four distributions totaling $410.00, $20.00 and $20.00 per
Interest in 1996, 1995 and 1994, respectively. See Statement of Partners'
Capital for additional information. Distributions were comprised of $170.00
of Net Cash Receipts and $240.00 of Net Cash Proceeds in 1996, and $20.00 of
Net Cash Receipts for both 1995 and 1994. Distributions increased in 1996 as
compared to 1995 primarily due to the property sales and the distribution of
cash reserves.
<PAGE>
In January 1997, the Partnership paid $8,317,733 ($157.50 per Interest)
representing the regular quarterly distribution of Net Cash Receipts of $2.50
per Interest for the fourth quarter of 1996 and a special Net Cash Proceeds
distribution of $155.00 per Interest from the Knollwood Village Apartments
sale. The Partnership has discontinued regular quarterly distributions due to
the minimum amount of cash flow that the Partnership receives from Canyon Point
Apartments. At such time as Canyon Point Apartments is sold, available Net
Cash Proceeds will be distributed to the Limited Partners. Including the
January 1997 distribution, Limited Partners have received distributions of Net
Cash Receipts of $288.00 and Net Cash Proceeds of $409.50, totaling $697.50 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.
Certain statements in this Form 10-K constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements may include projections of revenues, income or losses, capital
expenditures, plans for future operations, financing plans or requirements, and
plans relating to the property of the Partnership, as well as assumptions
relating to the foregoing.
The forward-looking statements made by the Partnership are subject to known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to differ materially
from any future results, performance or achievements expressed or implied by
the forward-looking statements.
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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/ Jayne A. Kosik
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Jayne A. Kosik
Managing Director and Chief
Financial Officer (Principal
Accounting and Financial
Officer) of Balcor Equity
Partners-XVIII, the General Partner
Date: April 4, 1997
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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
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President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Equity
Partners-XVIII, the General
/s/ Thomas E. Meador Partner April 4, 1997
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Thomas E. Meador
Managing Director and Chief
Financial Officer (Principal
Accounting Officer and
Financial Officer) of Balcor
Equity Partners-XVIII, the
/s/ Jayne A. Kosik General Partner April 4, 1997
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Jayne A. Kosik
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