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, 1998
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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
- ------------------------------- -------------------
(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
----
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
- ----------------
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 has retained cash reserves from the sale
of its real estate investments for contingencies which exist or may arise. The
Registrant's operations currently consist of interest income earned on
short-term investments and the payment of administrative expenses.
The Registrant utilized the net offering proceeds to acquire four real property
investments and a minority joint venture interest in one additional property
and has since disposed of all of these investments. The Partnership Agreement
provides that the proceeds of any sale or refinancing of the Registrant's
properties will not be reinvested in new acquisitions.
The Partnership Agreement provides for the dissolution of the Registrant upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Registrant sold its final real estate investment in July 1997.
The Registrant has retained a portion of the cash from the property sales to
satisfy obligations of the Registrant as well as establish a reserve for
contingencies. The timing of the termination of the Registrant 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 Registrant
including, but not limited to, the lawsuits discussed in "Item 3. Legal
Proceedings". Due to this litigation, the Registrant will not be dissolved and
reserves will be held by the Registrant until the conclusion of all
contingencies. There can be no assurances as to the time frame for conclusion
of these contingencies.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation - Liquidity and Capital Resources" for information regarding the
Registrant's Year 2000 readiness.
The Registrant no longer has an ownership interest in any real estate
investment. The General Partner is not aware of any material potential
liability relating to environmental issues or conditions affecting real estate
formerly owned by 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.
Item 2. Properties
- ------------------
As of December 31, 1998, the Registrant did not own any properties.
<PAGE>
In the opinion of the General Partner, the Registrant has obtained adequate
insurance coverage for property liability and property damage matters.
See Notes to Financial Statements for other information regarding former real
estate property investments.
Item 3. Legal Proceedings
- --------------------------
Klein, et al. vs. Lehman Brothers, Inc., et al.
- -----------------------------------------------
On August 30, 1996, a proposed class action complaint was filed, Lenore Klein,
et al. vs. Lehman Brothers, Inc., et al. (Superior Court of New Jersey, Law
Division, Union County, Docket No. Unn-L-5162-96). The complaint was amended on
each of October 18, 1996, December 5, 1997 and January 15, 1998. The
Registrant, additional limited partnerships which were sponsored by The Balcor
Company (together with the Registrant, the "Affiliated Partnerships"), The
Balcor Company, American Express Company, Lehman Brothers, Inc., Smith Barney,
Inc., American Express Financial Advisors, and other affiliated entities and
various individuals are named defendants in the action. The most recent amended
complaint, plaintiffs' Third Amended Complaint, alleges, among other things,
common law fraud and deceit, negligent misrepresentation, breach of contract,
breach of fiduciary duty and violation of certain New Jersey statutes relating
to the disclosure of information in the offering of limited partnership
interests in the Affiliated Partnerships, the marketing of interests in the
Affiliated Partnerships and the acquisition of real properties for the
Affiliated Partnerships. The Third Amended Complaint seeks judgment for
compensatory damages equal to the amount invested in the Affiliated
Partnerships by the proposed class plus interest; general damages for injuries
arising from the defendants' alleged actions; equitable relief, including
rescission, on certain counts; punitive damages; treble damages on certain
counts; recovery from the defendants of all profits received by them as a
result of their alleged actions relating to the Affiliated Partnerships;
attorneys' fees and other costs.
In June 1998, the defendants filed a motion to dismiss the complaint for
failure to state a cause of action. Oral arguments were heard by the court on
August 21, 1998. On September 24, 1998, the judge issued a letter opinion
granting the defendants' motion to dismiss the complaint. On October 23, 1998,
the judge announced that he would enter an order dismissing the complaint
without prejudice, but stated that the plaintiffs would be required to file any
new pleading in a separate action and would not be allowed to amend the
existing complaint. The plaintiffs moved for a reconsideration of the judge's
ruling, which was denied on November 20, 1998. On December 28, 1998, plaintiffs
filed a notice of appeal from both the judge's October 23 and November 20, 1998
rulings.
On March 11, 1999, an order was entered by the Superior Court of New Jersey,
Appellate Division, dismissing the appeal in this action with prejudice.
Therefore, this will be the final report to investors regarding this matter.
<PAGE>
Masri vs. Lehman Brothers, Inc., et al.
- ---------------------------------------
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, 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' alleged actions; recovery from the defendants of
all profits received by them as a result of their alleged 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. The Registrant believes it has meritorious defenses
to contest the claims. It is not determinable at this time how the outcome of
this action will impact the remaining cash reserves of the Registrant.
Plaintiffs' lead counsel also represents the plaintiffs in the Lenore Klein
matter discussed above. Plaintiffs' counsel has indicated an intent to withdraw
this complaint. Raymond Masri has joined as an additional plaintiff in the
Lenore Klein matter discussed above.
Bruss et al. vs. Lehman Brothers, Inc., et al.
- ----------------------------------------------
On January 25, 1999, a proposed class action complaint was filed, Dorothy
Bruss, et al. vs. Lehman Brothers, Inc., et al. (Superior Court of New Jersey,
Law Division, Essex County, Docket No. L-000898-99). The Registrant,
additional limited partnerships which were sponsored by The Balcor Company
(together with the Registrant, the "Affiliated Partnerships"), The Balcor
Company, American Express Company, Lehman Brothers, Inc., Smith Barney, Inc.,
American Express Financial Corporation, and other affiliated entities and
various individuals are named defendants in the action. Lead counsel
representing the plaintiffs in this case is the same counsel representing the
plaintiffs in each of the Lenore Klein and Raymond Masri cases discussed above.
The complaint relates largely to the same issues as those raised in the Lenore
Klein and the Raymond Masri cases. The complaint alleges, among other things,
common law fraud and deceit, negligent misrepresentation, breach of contract,
breach of fiduciary duty and violation of certain New Jersey and other similar
state statutes relating to the disclosure of information in the offering of
limited partnership interests in the Affiliated Partnerships, the marketing of
interests in the Affiliated Partnerships and the acquisition of real property
for the Affiliated Partnerships. The complaint seeks judgement for
compensatory damages equal to the amount invested in the Affiliated
<PAGE>
Partnerships by the proposed class plus interest; general damages for injuries
arising from the defendants' alleged actions; equitable relief, including
rescission on certain counts; punitive damages; treble damages on certain
counts; recovery from the Defendants of all profits received by them as a
result of their alleged actions relating to the Affiliated Partnerships; and
attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Registrant believes that it has meritorious
defenses to contest the claims. It is not determinable at this time how the
outcome of this action will impact the remaining cash reserves of the
Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1998.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
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Matters
- -------
There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding previous distributions, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources".
As of December 31, 1998, the number of record holders of Limited Partnership
Interests of the Registrant was 4,949.
Item 6. Selected Financial Data
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Year ended December 31,
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1998 1997 1996 1995 1994
----------- ---------- ---------- ---------- ------------
Total income $204,664 $851,817 $6,007,299 $16,743,567 $16,740,793
Provision for in-
vestment property
write-down None None None 1,016,987 None
Income (loss) before
gain on sales of
properties and
extraordinary
items 23,315 (602,105) (454,847) 1,240,270 885,014
Net income 23,315 518,188 15,908,429 1,240,270 885,014
Net income per
Limited Partner-
ship Interest-Basic
and Diluted 0.44 9.81 298.22 23.25 16.59
Total assets 1,749,212 1,691,997 15,865,854 58,114,553 58,914,891
Mortgage notes
payable None None 5,101,842 39,475,209 40,078,625
Distributions per
Limited Partner-
ship Interest(A) None 176.26 410.00 20.00 20.00
(A) These amounts include distributions of Original Capital of $173.76 and $240
per Limited Partnership Interest for 1997 and 1996, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations
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<PAGE>
Operations
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Summary of Operations
- ---------------------
Balcor Equity Properties-XVIII A Real Estate Limited Partnership (the
"Partnership") sold three properties during 1996 and sold its remaining
property in 1997 and recognized gains in 1996 and 1997 in connection with these
property sales. During 1998, the operations of the Partnership consisted of
interest income earned on short-term investments and income resulting from the
release to the Partnership of escrow funds which were set up in connection with
the sale of the 101 Marietta Tower office complex. These amounts were partially
offset by the payment of administrative expenses. As a result, the
Partnership's net income decreased during 1998 as compared to 1997. The gain
recognized in connection with the 1997 sale was significantly lower than the
total gains related to the three 1996 sales. As a result, the Partnership
recognized lower net income during 1997 as compared to 1996. Further discussion
of the Partnership's operations is summarized below.
1998 Compared to 1997
- ---------------------
The Canyon Pointe Apartments was sold in July 1997 and 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 distributed to Limited Partners in January 1997 and the proceeds from the
July 1997 sale of the Canyon Pointe Apartments were distributed to Limited
Partners in October 1997. As a result, the Partnership earned higher interest
income on short-term investments during 1997 as compared to 1998.
The Partnership recognized other income during 1998 in connection with the
release to the Partnership of escrow funds which were set up in connection with
the sale of the 101 Marietta Tower office complex, which was sold in 1996 and
during 1997 in connection with a partial refund of prior years' insurance
premiums relating to the Partnership's properties.
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 were classified as
other expenses.
Administrative expenses decreased during 1998 as compared to 1997 primarily due
to a decrease in accounting, data processing, investor services and bank fees.
This decrease was partially offset by legal fees accrued in connection with the
class action litigation.
<PAGE>
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.
1997 Compared to 1996
- ---------------------
The Partnership sold the 101 Marietta Tower office complex, Mallard Cove
Apartments and Knollwood Village Apartments in February, July and October 1996,
respectively, and recognized gains in connection with these sales of
$16,267,970. The sales of these properties resulted in decreases in rental and
service income, interest expense on mortgage notes payable, depreciation
expense, property operating expenses, amortization expense, real estate tax
expense and property management fees during 1997 as compared to 1996.
Due to the timing of the distribution of sale proceeds from the 1996 property
sales, average cash balances available for investment were higher during 1996
than in 1997 and interest income on short-term investments decreased during
1997 as compared to 1996.
The Partnership incurred higher professional fees during 1996 in connection
with the valuation of the Partnership's assets. In addition, legal, portfolio
management, and accounting fees decreased during 1997 due to the sales of the
Partnership's properties. As a result, administrative expenses decreased during
1997 as compared to 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
loan 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 in 1996, 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 amounts were recorded as extraordinary
items and classified as debt extinguishment expense for financial statement
purposes.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $58,000 as of
December 31, 1998 as compared to December 31, 1997 due to the receipt of
interest income earned on short-term investments and the release to the
Partnership of escrow funds which were set up in connection with the sale of
the 101 Marietta Tower office complex. These amounts were partially offset by
the payment of administrative expenses.
<PAGE>
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. The Partnership sold its final real estate investment in July
1997. 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 "Item 3. Legal
Proceedings". 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.
The Partnership made distributions in 1997 and 1996 totaling $176.26 and
$410.00 per Limited Partnership Interest, respectively. The Partnership did not
make any distributions to Limited Partners in 1998. See Statements of Partners'
Capital for additional information. Distributions were comprised of $2.50 per
Interest of Net Cash Receipts and $173.76 per Interest of Net Cash Proceeds in
1997 and $170.00 per Interest of Net Cash Receipts and $240.00 per Interest of
Net Cash Proceeds during 1996.
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.
The Partnership sold all of its remaining real property investments and
distributed a majority of the proceeds from these sales to Limited Partners in
1996 and 1997. Since the Partnership no longer has any operating assets, the
number of computer systems and programs necessary to operate the Partnership
has been significantly reduced. The Partnership relies on third party vendors
to perform most of its functions and has implemented a plan to determine the
Year 2000 compliance status of these key vendors. The Partnership is within its
timeline for having these plans completed prior to the year 2000.
The Partnership's plan to determine the Year 2000 compliance status of its key
vendors involves the solicitation of information from these vendors through the
use of surveys, follow-up discussions and review of data where needed. The
Partnership has sent out surveys to these vendors and received back a majority
of these surveys. While the Partnership cannot guarantee Year 2000 compliance
by its key vendors, and in many cases will be relying on statements from these
vendors without independent verification, preliminary surveys indicate that the
key vendors performing services for the Partnership are aware of the issues and
are working on a solution to achieve compliance before the year 2000. The
Partnership is in the process of developing a contingency plan in the event any
of its key vendors are not Year 2000 compliant prior to the year 2000. As part
of its contingency plan, the Partnership will identify replacement vendors in
<PAGE>
the event that current vendors are not substantially Year 2000 compliant by
June 30, 1999. The Partnership does not believe that failure by any of its key
vendors to be Year 2000 compliant by the year 2000 would have a material effect
on the business, financial position or results of operations of the
Partnership.
Certain statements in this report 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 statements regarding income or losses 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 from any
future results, performance or achievements expressed or implied by the
forward-looking statements.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
The supplemental financial information specified by Item 305 of Regulation S-K
is not applicable.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
See Index to Financial Statements 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, 1998 December 31, 1997
----------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
---------- --------- ---------- ---------
Total assets $1,749,212 $8,875,867 $1,691,997 8,810,701
Partners' capital
(deficit):
General Partner (62,506) (175,037) (62,506) (175,037)
Limited Partners 1,734,093 8,973,277 1,710,778 8,955,339
Net income (loss):
General Partner None None None (105,028)
Limited Partners 23,315 17,938 518,188 3,170,482
Per Limited Part-
nership Interest 0.44(A) 0.34 9.81(A) 60.03
<PAGE>
(A) Amounts represent basic and diluted net income per Limited Partnership
Interest.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
(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 Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 51) 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 member of the board of directors 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.
Mr. Meador is on the Board of Directors of Grubb & Ellis Company, a publicly
traded commercial real estate firm. Mr. Meador was elected to the Board of
Grubb & Ellis Company in May 1998. Mr. Meador is also a director of AMLI
Commercial Properties Trust, a private real estate investment trust that owns
office and industrial buildings in the Chicago, Illinois area. Mr. Meador was
elected to the Board of AMLI Commercial Properties Trust in August 1998.
Alexander J. Darragh (age 44) joined Balcor in September 1988 and is
responsible for real estate advisory services for Balcor and American Express
Company. Mr. Darragh received masters' degrees in Urban Geography from Queen's
University and in Urban Planning from Northwestern University.
Jayne A. Kosik (age 41) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. Ms. Kosik is also a member of the board of directors of The Balcor
Company. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Senior Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.
(d) There is no family relationship between any of the foregoing officers.
<PAGE>
(e) 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 1998.
Item 11. Executive Compensation
- -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of the General Partner. The executive 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 of the officers and affiliates of the partners of the General Partner
do not own any additional Interests.
In addition, Balcor LP Corp., an affiliate of the General Partner, holds title
to 5 Limited Partnership Interests in the Partnership due exclusively to
instances in which Limited Partners abandoned title to their Limited
Partnership Interests. Balcor LP Corp. is a nominee holder only of such
Interests and has disclaimed any economic or beneficial ownership in said
Interests. All distributions of cash payable with respect to such Interests
held by Balcor LP Corp. are returned to the Partnership for distribution to
other Limited Partners in accordance with the Partnership Agreement.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
<PAGE>
(a & b) See Note 8 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
See Note 4 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 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 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.
(27) Financial Data Schedule of the Registrant for 1998 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended December 31, 1998.
(c) Exhibits: See Item 14(a)(3)above.
<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/ Jayne A. Kosik
-----------------------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial Officer) of
Balcor Equity Partners-XVIII, the
General Partner
Date:March 19, 1999
-----------------------
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
Partner
/s/ Thomas E. Meador March 19, 1999
- ---------------------- -------------
Thomas E. Meador
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial Officer)
of Balcor Equity Partners-XVIII,
the General Partner
/s/ Jayne A. Kosik March 19, 1999
- ---------------------- -------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1998 and 1997
Statements of Partners' Capital for the years ended December 31, 1998, 1997 and
1996
Statements of Income and Expenses, for the years ended December 31, 1998, 1997
and 1996
Statements of Cash Flows, for the years ended December 31, 1998, 1997 and 1996
Notes to Financial Statements
Financial Statement Schedules 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:
In our opinion, the accompanying balance sheets and the related statements of
partners' capital, of income and expenses and of cash flows present fairly, in
all material respects, the financial position of Balcor Equity Properties-XVIII
A Real Estate Limited Partnership (An Illinois Limited Partnership, the
"Partnership") at December 31, 1998 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles. 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 conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As described in Note 2 to the financial statements, the partnership agreement
provides for the dissolution of the Partnership upon the disposition of all its
real estate interests. As of December 31, 1998, the Partnership no longer has
an ownership interest in any real estate investment. Upon resolution of the
litigation described in Note 13 to the financial statements, the Partnership
intends to cease operations and dissolve.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 17, 1999
<PAGE>
BALCOR EQUITY PROPERTIES-XVIII
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
-------------- --------------
Cash and cash equivalents $ 1,741,812 $ 1,684,046
Accrued interest receivable 7,400 7,951
-------------- --------------
$ 1,749,212 $ 1,691,997
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 55,610 $ 15,410
Due to affiliates 22,015 28,315
-------------- --------------
Total liabilities 77,625 43,725
-------------- --------------
Commitments and contingencies
Limited Partners' capital (52,811
Interests issued and outstanding) 1,734,093 1,710,778
General Partner's deficit (62,506) (62,506)
-------------- --------------
Total partners' capital 1,671,587 1,648,272
-------------- --------------
$ 1,749,212 $ 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 PARTNERS' CAPITAL
for the years ended December 31, 1998, 1997 and 1996
Partners' Capital (Deficit) Accounts
-------------- -----------------------------
General Limited
Total Partner Partners
-------------- -------------- --------------
Balance at December 31, 1995 $ 16,660,107 $ (221,590) $ 16,881,697
Cash distributions to
Limited Partners (A) (21,652,510) (21,652,510)
Deemed distribution (B) (477,475) (477,475)
Net income for the year
ended December 31, 1996 15,908,429 159,084 15,749,345
-------------- -------------- --------------
Balance at December 31, 1996 10,438,551 (62,506) 10,501,057
Cash distributions to
Limited Partners (A) (9,308,467) (9,308,467)
Net income for the year
ended December 31, 1997 518,188 518,188
-------------- -------------- --------------
Balance at December 31, 1997 1,648,272 (62,506) 1,710,778
Net income for the year
ended December 31, 1998 23,315 23,315
-------------- -------------- --------------
Balance at December 31, 1998 $ 1,671,587 $ (62,506) $ 1,734,093
============== ============== ==============
(A) Summary of cash distributions per Limited Partnership Interest:
1998 1997 1996
-------------- -------------- --------------
First Quarter None $ 157.50 $ 5.00
Second Quarter None 2.76 310.00
Third Quarter None None 25.00
Fourth Quarter None 16.00 70.00
(B) This amount represents a state withholding tax paid on behalf of
the Limited Partners relating to the gain on the sales of the
101 Marietta Tower office complex and the Mallard Cove Apartments.
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, 1998, 1997 and 1996
1998 1997 1996
-------------- -------------- --------------
Income:
Rental $ 692,173 $ 5,386,395
Service 14,592 106,759
Interest on short-term
investments $ 88,974 122,907 514,145
Other income 115,690 22,145
-------------- -------------- --------------
Total income 204,664 851,817 6,007,299
-------------- -------------- --------------
Expenses:
Interest on mortgage
notes payable 256,219 1,585,566
Depreciation 141,606 1,182,379
Amortization of deferred
expenses 13,155 59,481
Property operating 459,772 2,354,671
Real estate taxes 107,537 514,169
Property management fees 35,575 339,238
Other expenses 219,839
Administrative 181,349 220,219 426,642
-------------- -------------- --------------
Total expenses 181,349 1,453,922 6,462,146
-------------- -------------- --------------
Income (loss) before gain on
sale of properties and
extraordinary items 23,315 (602,105) (454,847)
Gain on sale of properties 1,141,112 16,267,970
-------------- -------------- ------------
Income before extraordinary
items 23,315 539,007 15,813,123
Extraordinary items:
Gain on extinguishment
of debt 787,767
Debt extinguishment expense (20,819) (692,461)
-------------- -------------- --------------
Net income $ 23,315 $ 518,188 $ 15,908,429
============== ============== ==============
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, 1998, 1997 and 1996
(CONTINUED)
1998 1997 1996
-------------- -------------- --------------
Income before extraordinary
items allocated to General
Partner None None $ 158,131
============== ============== ==============
Income before extraordinary
items allocated to
Limited Partners $ 23,315 $ 539,007 $ 15,654,992
============== ============== ==============
Income before extraordinary
items per Limited
Partnership Interest(52,811
issued and outstanding) -
Basic and Diluted $ 0.44 $ 10.20 $ 296.43
============== ============== ==============
Extraordinary items allocated
to General Partner None None $ 953
============== ============== ==============
Extraordinary items allocated
to Limited Partners None $ (20,819) $ 94,353
============== ============== ==============
Extraordinary items per
Limited Partnership
Interest (52,811 issued
and outstanding) - Basic
and Diluted None $ (0.39) $ 1.79
============== ============== ==============
Net income allocated
to General Partner None None $ 159,084
============== ============== ==============
Net income allocated
to Limited Partners $ 23,315 $ 518,188 $ 15,749,345
============== ============== ==============
Net income per Limited
Partnership Interest(52,811
issued and outstanding) -
Basic and Diluted $ 0.44 $ 9.81 $ 298.22
============== ============== ==============
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, 1998, 1997 and 1996
1998 1997 1996
-------------- -------------- --------------
Operating activities:
Net income $ 23,315 $ 518,188 $ 15,908,429
Adjustments to reconcile
net income to net cash
provided by or (used in)
operating activities:
Gain on sale
of properties (1,141,112) (16,267,970)
Gain on extinguishment
of debt (787,767)
Debt extinguishment
expense 20,819 (2,805)
Depreciation 141,606 1,182,379
Amortization of deferred
expenses 13,155 59,482
Net change in:
Escrow deposits 263,326 1,175,420
Accounts and accrued
interest receivable 551 92,479 709,108
Note receivable 31,878 (31,878)
Prepaid expenses 17,314 161,374
Accounts payable 40,200 (29,494) (159,317)
Due to affiliates (6,300) (70,632) 65,517
Accrued liabilities (167,154) (546,744)
Security deposits (14,456) (187,451)
-------------- -------------- --------------
Net cash provided by or
(used in) operating
activities 57,766 (324,083) 1,277,777
-------------- -------------- --------------
Investing activities:
Proceeds from sales of
real estate 6,300,000 39,094,483
Costs incurred in
connection with
sales of real estate (154,363) (1,213,544)
-------------- --------------
Net cash provided by
investing activities 6,145,637 37,880,939
-------------- --------------
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, 1998, 1997 and 1996
(Continued)
1998 1997 1996
-------------- -------------- --------------
Financing activities:
Distributions to Limited
Partners (9,308,467) (21,652,510)
Deemed distribution (477,475)
Repayment of mortgage notes
payable (5,071,928) (16,772,264)
Release of capital
improvement escrow 389,270
Funding of capital
improvement escrow (133,650)
Principal payments on
mortgage notes payable (29,914) (247,952)
-------------- --------------
Net cash used in
financing activities (14,410,309) (38,894,581)
-------------- -------------- --------------
Net change in cash and cash
equivalents 57,766 (8,588,755) 264,135
Cash and cash equivalents at
beginning of year 1,684,046 10,272,801 10,008,666
-------------- -------------- --------------
Cash and cash equivalents at
end of year $ 1,741,812 $ 1,684,046 $ 10,272,801
============== ============== ==============
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") has retained cash reserves from the sale of its real estate
investments for contingencies which exist or may arise. The Partnership's
operations currently consist of interest income earned on short-term
investments and the payment of administrative expenses.
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. The Partnership sold its final real estate investment in July
1997. 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 13 of the 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. 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 was computed using the straight-line method. Rates
used in the determination of depreciation were based upon the following
estimated useful lives:
Years
-----
Buildings and improvements 18-30
Furniture and fixtures 5
Maintenance and repairs were charged to expense when incurred. Expenditures for
improvements were charged to the related asset account.
<PAGE>
As properties were sold, the related costs and accumulated depreciation were
removed from the respective accounts. Any gain or loss on disposition was
recognized in accordance with generally accepted accounting principles.
(c) The Partnership recorded its investments in real estate at the lower of
cost or fair value, and periodically assessed, but not less than on an annual
basis, possible impairment to the value of its properties. The General Partner
estimated the fair value of its properties based on the current sales price
less estimated closing costs. In the event the General Partner determined an
impairment had occurred, and the carrying amount of the real estate asset would
not be recovered, a provision was recorded to reduce the carrying basis of the
property to its estimated fair value. The General Partner considered 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 consisted of mortgage refinancing fees which were
amortized over the terms of the respective agreements. Upon sale, any remaining
balance was recognized as debt extinguishment expense and classified as an
extraordinary item.
(e) The Partnership calculates the fair value of its financial instruments
based on estimates using present value techniques. The Partnership includes
this additional information in the notes to the financial statements when the
fair value is different than the carrying value of those financial instruments.
When the fair value reasonably approximates the carrying value, no additional
disclosure is made.
(f) For financial statement purposes, prior to 1997, the partners were
allocated income and losses in accordance with the provisions in the
Partnership Agreement. In order for the capital account balances to more
accurately reflect the partners' remaining economic interests in the
Partnership, the income (loss) allocations have been adjusted.
(g) Cash and cash equivalents include all unrestricted, highly liquid
investments with an original maturity of three months or less. Cash is held or
invested in one financial institution.
(h) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(i) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles.
(j) Statement of Financial Accounting Standards, No. 128, "Earnings per Share"
was adopted by the Partnership effective for the year ended December 31, 1997
and has been applied to the prior earnings period presented in the financial
statements. Since the Partnership has no dilutive securities, there is no
difference between basic and diluted net income per Limited Partnership
Interest.
<PAGE>
(k) Certain reclassifications of a prior year's information were made to
conform to the 1998 presentation.
4. 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.
The Partnership Agreement provides that the General Partner will be allocated
1% of the profits and losses and the Limited Partners will be allocated 99% of
the profits and losses. For financial statement purposes, prior to 1997, the
partners were allocated income and losses in accordance with the provisions in
the Partnership Agreement. In order for the capital account balances to more
accurately reflect the partners' remaining economic interests in the
Partnership, the income (loss) allocations have been adjusted.
In accordance with the Partnership Agreement, 100% of Net Cash Receipts
available for distribution have been distributed to holders of Limited
Partnership Interests. Under certain circumstances, the General Partner would
have participated in the Net Cash Proceeds of the sale or refinancing of
Partnership properties. The General Partner's participation was limited to the
receipt by Limited Partners of an amount equal to their Original Capital plus a
6% per annum non-compounded return. Thereafter, Net Cash Proceeds were to be
distributed 85% to Limited Partners and 15% to the General Partner, provided
that the General Partner's distributive share would 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. Since the
required subordination levels were not met, the General Partner has not
received any distributions of Net Cash Receipts or Net Cash Proceeds during the
lifetime of the Partnership.
5. Mortgage Notes Payable:
During 1997 and 1996 the Partnership incurred interest expense on mortgage
notes payable of $256,219 and $1,585,566 and paid interest expense of $256,219
and $1,983,150, respectively.
6. Management Agreements:
The Partnership's properties were managed by a third party management company
prior to the sale of the properties. These management agreements provided for
annual fees of 5% of gross operating receipts.
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
<PAGE>
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 1998 in the financial statements is $5,377 more than the tax
income of the Partnership for the same period.
8. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
For the For the For the
Year Ended Year Ended Year Ended
12/31/98 12/31/97 12/31/96
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $ 6,078 $4,302 $15,172 $6,974 $11,263 $15,167
Data processing 2,224 872 2,702 1,352 1,756 None
Legal 4,804 3,407 16,199 4,302 11,036 14,863
Portfolio management 15,759 13,434 47,674 12,627 35,006 49,509
Other 1,370 None 4,829 1,370 None None
Property sales 1,690 None 19,408 1,690 14,282 19,408
Prior to May 1995, the Partnership participated in an insurance deductible
program with other affiliated partnerships in which the program paid claims up
to the amount of the deductible under the master insurance policy for its
properties. The program was administered by an affiliate of the General Partner
who received no fee for administering the program. However, the General Partner
was reimbursed for program expenses. The Partnership paid premiums to the
deductible insurance program relating to claims for periods prior to May 1,
1995 of $8,804 for 1996.
9. Property Sales:
(a) In July 1997, the Partnership sold the Canyon Pointe Apartments in an all
cash sale for $6,300,000. From the proceeds of the sale, the Partnership paid
$5,071,928 to the third party mortgage holder in full satisfaction of the first
mortgage loan, and paid $154,363 in selling costs. The basis of the property
was $5,004,525, which is net of accumulated depreciation of $3,825,618. For
financial statement purposes, the Partnership recognized a gain of $1,141,112
from the sale of this property.
(b) In February 1996, the Partnership sold the 101 Marietta Tower office
complex for $26,000,000. The purchaser of the property took title subject to
the existing $17,353,151 first mortgage loan, which represents a non cash
transaction to the Partnership. Accordingly, the non-cash aspect of this
transaction is not presented in the Partnership's Statements of Cash Flows. The
<PAGE>
Partnership paid $308,794 in selling costs. In addition, the Partnership paid a
state withholding tax of $156,949 on behalf of the Limited Partners relating to
the gain on sale of the property which has been recorded as a deemed
distribution for financial statements purposes. The basis of the property was
written down at December 31, 1995 to an amount equal to the sale price less
closing costs. Due to the classification of the state withholding tax as a
deemed distribution, the Partnership recognized a gain of $156,949 from the
property sale in 1996.
(c) 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. In addition, the Partnership
paid a state withholding tax of $320,526 on behalf of the Limited Partners
relating to the gain on sale of the property which has been recorded as a
deemed distribution for financial statements purposes. The basis of the
property was $5,148,349, which is net of accumulated depreciation of
$3,432,919. For financial statement purposes, the Partnership recognized a gain
of $2,600,351 from the sale of this property.
(d) 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
$347,633 of prepayment penalties. The basis of the property was $7,935,880,
which is net of accumulated depreciation of $13,201,999. For financial
statement purposes, the Partnership recognized a gain of $13,510,670 from the
sale of this property.
10. Extraordinary Items:
(a) The purchaser of the 101 Marietta Tower office complex acquired the
property in February 1996 subject to the existing first mortgage loan. The
Partnership recognized an extraordinary gain on extinguishment of debt of
$787,767 in 1996 representing the difference between the contractual amount of
the first mortgage loan at the time of sale of $17,353,151 and the carrying
amount of the note for financial statement purposes of $16,565,384 which
included $825,781 of accrued interest and the write-off of unamortized deferred
fees of $38,014.
(b) 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. In addition, in connection with the sales of the
Mallard Cove Apartments and Knollwood Village Apartments in 1996, 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
amounts were recorded as extraordinary items and classified as debt
extinguishment expense for financial statement purposes.
<PAGE>
11. Other Income:
The Partnership recognized other income of $115,690 during 1998 in connection
with the release to the Partnership of escrow funds which were set up in
connection with the sale of the 101 Marietta Tower office complex, which was
sold in 1996. The Partnership recognized other income of $22,145 during 1997
primarily in connection with refunds of prior years' insurance premiums
relating to the Partnership's properties.
12. Other Expenses:
The Partnership paid $118,596 in 1997 for real estate tax consulting fees
related to the 101 Marietta Tower office complex, which was sold in 1996. In
connection with the 1996 sale of the Knollwood Village Apartments, the
Partnership paid $101,243 in 1997 for a state income tax liability related to
the gain on the sale of the property. These items have been recorded as other
expenses for financial statement purposes.
13. Contingencies:
The Partnership is currently involved in two related lawsuits, Masri vs.
Lehman Brothers, Inc., et al. and Bruss, et al. vs. Lehman Brothers, Inc.,
et al., whereby the Partnership and certain affiliates have been named as
defendants alleging 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
the marketing efforts related to the offering of the Limited Partnership
Interests of the Partnership. The defendants continue to vigorously contest
these actions. A plantiff class has not been certified in either action.
With respect to the Masri case, no determinations upon any significant issues
have been made. The Bruss complaint was filed on January 25, 1999. It is not
determinable at this time how the outcome of either action will impact the
remaining cash reserves of the Partnership. The Partnership believes it has
meritorious defenses to contest the claims.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1742
<SECURITIES> 0
<RECEIVABLES> 7
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1749
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1749
<CURRENT-LIABILITIES> 78
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1671
<TOTAL-LIABILITY-AND-EQUITY> 1749
<SALES> 0
<TOTAL-REVENUES> 205
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 182
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 23
<INCOME-TAX> 0
<INCOME-CONTINUING> 23
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
</TABLE>
