SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1998
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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
September 30, 1998 and December 31, 1997
(Unaudited)
ASSETS
1998 1997
-------------- --------------
Cash and cash equivalents $ 1,755,956 $ 1,684,046
Accounts and accrued interest receivable 7,531 7,951
-------------- --------------
$ 1,763,487 $ 1,691,997
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 33,655 $ 15,410
Due to affiliates 41,426 28,315
-------------- --------------
Total liabilities 75,081 43,725
-------------- --------------
Commitments and contingencies
Limited Partners' capital (52,811
Interests issued and outstanding) 1,807,831 1,710,778
General Partner's deficit (119,425) (62,506)
-------------- --------------
Total partners' capital 1,688,406 1,648,272
-------------- --------------
$ 1,763,487 $ 1,691,997
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1998 and 1997
(Unaudited)
1998 1997
-------------- --------------
Income:
Rental $ 692,173
Service 14,592
Interest on short-term investments $ 66,514 97,557
Other income 115,690
-------------- --------------
Total income 182,204 804,322
-------------- --------------
Expenses:
Interest on mortgage notes payable 256,219
Depreciation 141,606
Amortization of deferred expenses 13,155
Property operating 439,402
Real estate taxes 107,537
Property management fees 35,575
Other expenses 219,839
Administrative 142,070 153,538
-------------- --------------
Total expenses 142,070 1,366,871
-------------- --------------
Income (loss) before gain on sale of
property and extraordinary item 40,134 (562,549)
Gain on sale of property 1,141,112
-------------- --------------
Income before extraordinary item 40,134 578,563
Extraordinary item:
Debt extinguishment expense (20,819)
-------------- --------------
Net income $ 40,134 $ 557,744
============== ==============
Loss before extraordinary item
allocated to General Partner $ (56,919) None
============== ==============
Income before extraordinary item
allocated to Limited Partners $ 97,053 $ 578,563
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1998 and 1997
(Unaudited)
(Continued)
1998 1997
-------------- --------------
Income before extraordinary item
per Limited Partnership Interest
(52,811 issued and outstanding) -
Basic and Diluted $ 1.84 $ 10.95
============== ==============
Extraordinary item allocated to General
Partner None None
============== ==============
Extraordinary item allocated to Limited
Partners None $ (20,819)
============== ==============
Extraordinary item per Limited Partnership
Interest (52,811 issued and outstanding)
- Basic and Diluted None $ (0.39)
============== ==============
Net loss allocated to General Partner $ (56,919) None
============== ==============
Net income allocated to Limited Partners $ 97,053 $ 557,744
============== ==============
Net income per Limited Partnership Interest
(52,811 issued and outstanding) -
Basic and Diluted $ 1.84 $ 10.56
============== ==============
Distributions to Limited Partners None $ 8,463,491
============== ==============
Distributions per Limited Partnership
Interest None $ 160.26
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1998 and 1997
(Unaudited)
1998 1997
-------------- --------------
Income:
Rental $ 89,531
Service 2,702
Interest on short-term investments $ 22,197 31,675
Other income 115,690
-------------- --------------
Total income 137,887 123,908
-------------- --------------
Expenses:
Interest on mortgage notes payable 37,548
Depreciation 19,704
Amortization of deferred expenses 1,831
Property operating 84,804
Real estate taxes 14,044
Property management fees 5,220
Administrative 40,834 29,096
-------------- --------------
Total expenses 40,834 192,247
-------------- --------------
Income (loss) before gain on sale of
property and extraordinary item 97,053 (68,339)
Gain on sale of property 1,141,112
-------------- --------------
Income before extraordinary item 97,053 1,072,773
Extraordinary item:
Debt extinguishment expense (20,819)
-------------- --------------
Net income $ 97,053 $ 1,051,954
============== ==============
Income before extraordinary item
allocated to General Partner None $ 110,961
============== ==============
Income before extraordinary item
allocated to Limited Partners $ 97,053 $ 961,812
============== ==============
The accompanying notes are an integral part of the financial statements
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1998 and 1997
(Unaudited)
(Continued)
1998 1997
-------------- --------------
Income before extraordinary item
per Limited Partnership Interest
(52,811 issued and outstanding) -
Basic and Diluted $ 1.84 $ 18.21
============== ==============
Extraordinary item allocated to General
Partner None None
============== ==============
Extraordinary item allocated to Limited
Partners None $ (20,819)
============== ==============
Extraordinary item per Limited Partnership
Interest (52,811 issued and outstanding)
- Basic and Diluted None $ (0.39)
============== ==============
Net income allocated to General Partner None $ 110,961
============== ==============
Net income allocated to Limited Partners $ 97,053 $ 940,993
============== ==============
Net income per Limited Partnership Interest
(52,811 issued and outstanding) -
Basic and Diluted $ 1.84 $ 17.82
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1998 and 1997
(Unaudited)
1998 1997
-------------- --------------
Operating activities:
Net income $ 40,134 $ 557,744
Adjustments to reconcile net income to
net cash provided by or (used in)
operating activities:
Gain on sale of property (1,141,112)
Debt extinguishment expense 20,819
Depreciation of property 141,606
Amortization of deferred expenses 13,155
Net change in:
Escrow deposits 263,326
Accounts and accrued interest
receivable 420 87,159
Note receivable 31,878
Prepaid expenses 17,314
Accounts payable 18,245 (28,918)
Due to affiliates 13,111 (52,474)
Accrued liabilities (167,154)
Security deposits (14,456)
-------------- --------------
Net cash provided by or (used in)
operating activities 71,910 (271,113)
-------------- --------------
Investing activities:
Proceeds from sale of real estate 6,300,000
Costs incurred in connection with sale
of real estate (154,363)
--------------
Net cash provided by investing activities 6,145,637
--------------
Financing activities:
Distributions to Limited Partners (8,463,491)
Repayment of mortgage note payable (5,071,928)
Principal payments on mortgage note payable (29,914)
--------------
Cash used in financing activities (13,565,333)
-------------- --------------
Net change in cash and cash equivalents 71,910 (7,690,809)
Cash and cash equivalents at beginning
of period 1,684,046 10,272,801
-------------- --------------
Cash and cash equivalents at end of period $ 1,755,956 $ 2,581,992
============== ==============
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 Policies:
(a) The income allocation between the Limited Partners and the General Partner
has been adjusted for financial statement purposes in order that the capital
account balances more accurately reflect their remaining economic interests as
provided for in the Partnership Agreement.
(b) In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the nine months
and quarter ended September 30, 1998, and all such adjustments are of a normal
and recurring nature.
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 1997, the Partnership sold its remaining property. The
Partnership has retained a portion of the cash from the property sales to
satisfy obligations of the Partnership as well as establish a reserve for
contingencies. 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 and costs stemming from litigation involving the Partnership
including, but not limited to, the lawsuits discussed in Note 5 of Notes to the
Financial Statements. Due to this litigation, the Partnership will not be
dissolved and reserves will be held by the Partnership until the conclusion of
all contingencies. There can be no assurances as to the time frame for
conclusion of these contingencies.
3. Interest Expense:
During the nine months ended September 30, 1997, the Partnership incurred and
paid interest expense on mortgage note payable of $256,219.
4. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1998 are:
Paid
-------------------------
Nine Months Quarter Payable
------------ --------- ---------
Reimbursement of expenses to
the General Partner, at cost $ 14,587 $ 5,549 $ 41,426
<PAGE>
5. Contingencies:
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 state securities and common law violations
with regard to the property acquisition process of the Partnership, and 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. No
determination of the merits has been made in one action. The other action was
dismissed without prejudice by the trial court on September 24, 1998 for
failure to state a cause of action. 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 of the Partnership. The Partnership believes
it has meritorious defenses to contest the claims.
<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. As of September 30, 1998, the Partnership has no
properties remaining in its portfolio.
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 1997 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
The operations of the Partnership in 1998 consisted primarily of interest
income earned on short-term investments and income resulting from the receipt
of escrow funds which were set up in connection with the sale of the 101
Marietta Office Building, which were partially offset by the payment of
administrative expenses. During July 1997, the Partnership sold the Canyon
Pointe Apartments and recognized a gain on the sale of the property. As a
result, the Partnership's net income decreased during the nine months and
quarter ended September 30, 1998 as compared to the same periods in 1997.
Further discussion of the Partnership's operations is summarized below.
1998 Compared to 1997
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1998 and 1997 refer
to both the nine months and quarters ended September 30, 1998 and 1997.
As a result of the sale of the Canyon Pointe Apartments in July 1997, the
Partnership recognized a gain in connection with the sale of $1,141,112. As a
result of the sale, rental and service income, interest expense on mortgage
notes payable, depreciation expense, amortization expense, property operating,
real estate tax expense and property management fees expense ceased during
1997.
The proceeds from the October 1996 sale of the Knollwood Village Apartments
were not distributed to Limited Partners until January 1997 and the proceeds
from the July 1997 sale of the Canyon Pointe Apartments were not distributed to
Limited Partners until October 1997. As a result, the Partnership earned higher
interest income on short-term investments during 1997 as compared to 1998.
<PAGE>
The Partnership recognized other income during the quarter ended September 30,
1998 due to the receipt of escrow funds which were set up in connection with
the sale of the 101 Marietta Office Building, which was sold in 1996.
During 1997, the Partnership paid real estate tax consulting fees related to
the 101 Marietta Tower office complex, which was sold in 1996, and a state
income tax liability related to the gain on the 1996 sale of Knollwood Village
Apartments. For financial statement purposes, these items have been classified
as other expenses.
Primarily as a result of legal fees accrued in connection with the class action
litigation, administrative expenses increased during the quarter ended
September 30, 1998 as compared to the same period in 1997.
In connection with the sale of the Canyon Pointe Apartments in 1997, the
Partnership wrote off the remaining unamortized deferred expenses related to
the mortgage loan of $20,819. This amount was recorded as an extraordinary
item and classified as debt extinguishment expense for financial statement
purposes.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $72,000 as of
September 30, 1998 as compared to December 31, 1997 due to the receipt of
interest income earned on short-term investments and escrow funds which were
set up in connection with the sale of the 101 Marietta Office Building, which
were partially offset by the payment of administrative expenses.
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 1997, the Partnership sold its remaining property. The
Partnership has retained a portion of the cash from the property sales to
satisfy obligations of the Partnership as well as establish a reserve for
contingencies. 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 and costs stemming from litigation involving the Partnership
including, but not limited to, the lawsuits discussed in Note 5 of Notes to the
Financial Statements. Due to this litigation, the Partnership will not be
dissolved and reserves will be held by the Partnership until the conclusion of
all contingencies. There can be no assurances as to the time frame for
conclusion of these contingencies.
To date, Limited Partners have received distributions of Net Cash Receipts of
$288.00 and Net Cash Proceeds of $428.26, totaling $716.26 per $1,000 Interest,
as well as certain tax benefits. No additional distributions are anticipated to
be made prior to termination of the Partnership. However, after paying final
partnership expenses, any remaining cash reserves will be distributed. Limited
Partners will not recover all of their original investment.
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
Klein, et al. vs Lehman Brothers, Inc., et al.
- -----------------------------------------------
With regard to the proposed class action complaint, Klein, et al. vs Lehman
Brothers, Inc., et al. (Superior Court of New Jersey, Law Division, Union
County, Docket No. Unn-L-5162-96), on June 9, 1998 the defendants filed a
motion to dismiss the complaint for failure to state a cause of action. The
motion was briefed by all parties and oral argument was heard by the court on
August 21, 1998. On September 24, 1998, the judge issued a letter opinion
granting the defendant's motion to dismiss the complaint, and on October 23,
1998, the judge announced that he would enter an order dismissing the complaint
without prejudice.
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 June 30, 1992 (Commission File No. 0-13357)
are incorporated herein by reference.
(10) Material Contracts:
(i) Agreement of Sale and attachment thereto relating to the sale of the Canyon
Pointe Apartments, San Antonio, Texas previously filed as Exhibit (2) to the
Registrant's Current Report on Form 8-K dated June 11, 1997, is incorporated
herein by reference.
(ii) First Amendment to Agreement of Sale and Escrow Agreement relating to the
sale of the Canyon Pointe Apartments, San Antonio, Texas, previously filed as
Exhibit (10)(d)(ii) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 is incorporated herein by reference.
(iii) Second Amendment to Agreement of Sale and Escrow Agreement relating to
the sale of the Canyon Pointe Apartments, San Antonio, Texas, previously filed
as Exhibit (10)(d)(iii) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997 is incorporated herein by reference.
<PAGE>
(27) Financial Data Schedule of the Registrant for the nine months ending
September 30, 1998 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended September 30, 1998.
<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
Senior Managing Director and
Chief Financial Officer
(Principal Accounting Officer)
of Balcor Equity Partners
- XVIII, the General Partner
Date: November 6, 1998
-----------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1756
<SECURITIES> 0
<RECEIVABLES> 7
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1763
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1763
<CURRENT-LIABILITIES> 75
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1688
<TOTAL-LIABILITY-AND-EQUITY> 1763
<SALES> 0
<TOTAL-REVENUES> 182
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 142
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 40
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<INCOME-CONTINUING> 40
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<CHANGES> 0
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<EPS-PRIMARY> 1.84
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</TABLE>
