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, 1994
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - -----
EXCHANGE ACT OF 1934.
For the transition period from to
------------ ------------
Commission file number 0-13334
-------
BALCOR REALTY INVESTORS 84-SERIES II
A REAL ESTATE LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 36-3223939
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
- - ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
--------------
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
----- -----
BALCOR REALTY INVESTORS 84-SERIES II
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
BALANCE SHEETS
September 30, 1994 and December 31, 1993
(Unaudited)
ASSETS
1994 1993
------------- -------------
Cash and cash equivalents $ 560,974 $ 1,160,704
Escrow deposits 1,155,280 1,149,671
Accounts and accrued interest receivable 340,595 65,276
Deferred expenses, net of accumulated
amortization of $635,373 in 1994
and $1,084,192 in 1993 793,697 1,064,613
------------- -------------
2,850,546 3,440,264
------------- -------------
Investment in real estate, at cost:
Land 11,076,389 15,412,784
Buildings and improvements 71,945,955 86,867,741
------------- -------------
83,022,344 102,280,525
Less accumulated depreciation 28,366,389 32,387,624
------------- -------------
Investment in real estate, net of
accumulated depreciation 54,655,955 69,892,901
------------- -------------
$ 57,506,501 $ 73,333,165
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Loans payable - affiliate $ 7,913,106 $ 7,775,723
Accounts payable 67,752 115,493
Due to affiliates 217,428 268,432
Accrued liabilities, principally interest
and real estate taxes 1,193,485 2,274,720
Security deposits 301,515 372,855
Purchase price, promissory and mortgage
notes payable 66,127,093 84,130,907
------------- -------------
Total liabilities 75,820,379 94,938,130
Affiliates' participation in joint ventures (1,181,694) (1,053,382)
Partners' capital (87,037 Limited Partnership
Interests issued and outstanding) (17,132,184) (20,551,583)
------------- -------------
$ 57,506,501 $ 73,333,165
============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 84-SERIES II
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
------------- -------------
Income:
Rental and service $ 13,264,620 $ 13,649,525
Interest on short-term investments 24,618 16,633
------------- -------------
Total income 13,289,238 13,666,158
------------- -------------
Expenses:
Interest on purchase price, promissory
and mortgage notes payable 5,079,007 6,436,559
Interest on short-term loans 276,264 190,779
Depreciation 1,945,451 2,051,714
Amortization of deferred expenses 516,901 344,441
Property operating 5,712,244 4,847,156
Real estate taxes 1,272,280 1,222,619
Property management fees 662,276 674,683
Administrative 574,295 515,527
Debt restructuring expense 736,036
------------- -------------
Total expenses 16,774,754 16,283,478
------------- -------------
Loss before gain on sale of properties,
participations in joint ventures and
extraordinary items (3,485,516) (2,617,320)
Gain on sale of properties 4,257,709 3,606,825
Affiliates' participation in losses
from joint ventures 44,860 74,936
------------- -------------
Income before extraordinary items 817,053 1,064,441
------------- -------------
Extraordinary items:
Gain on forgiveness of debt 2,602,346 1,234,276
Gain on foreclosure of properties 8,432,686
------------- ------------
Total extraordinary items 2,602,346 9,666,962
------------- -------------
Net income $ 3,419,399 $ 10,731,403
============= =============
Income before extraordinary items
allocated to General Partner $ 8,171 $ 10,645
============= =============
Income before extraordinary items
allocated to Limited Partners $ 808,882 $ 1,053,796
============= =============
Income before extraordinary items
per Limited Partnership Interest
(87,037 issued and outstanding) $ 9.29 $ 12.11
============= =============
Extraordinary items allocated to General
Partner $ 26,023 $ 96,669
============= =============
Extraordinary items allocated to Limited
Partners $ 2,576,323 $ 9,570,293
============= =============
Extraordinary items per Limited Partnership
Interest (87,037 issued and outstanding) $ 29.60 $ 109.96
============= =============
Net income allocated to General Partner $ 34,194 $ 107,314
============= =============
Net income allocated to Limited Partners $ 3,385,205 $ 10,624,089
============= =============
Net income per Limited Partnership
Interest (87,037 issued and outstanding) $ 38.89 $ 122.06
============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 84-SERIES II
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1994 and 1993
(Unaudited)
1994 1993
------------- -------------
Income:
Rental and service $ 4,274,912 $ 4,321,924
Interest on short-term investments 9,039 3,804
------------- -------------
Total income 4,283,951 4,325,728
------------- -------------
Expenses:
Interest on purchase price, promissory
and mortgage notes payable 1,666,941 2,023,541
Interest on short-term loans 107,572 60,014
Depreciation 623,160 661,145
Amortization of deferred expenses 49,879 66,834
Property operating 2,123,212 1,609,729
Real estate taxes 388,634 372,802
Property management fees 215,324 223,469
Administrative 189,008 122,216
------------- -------------
Total expenses 5,363,730 5,139,750
------------- -------------
Loss before gain on sale of properties,
participations in joint ventures and
extraordinary item (1,079,779) (814,022)
Gain on sale of properties 4,257,709
Affiliates' participation in losses
from joint ventures 44,891 31,699
------------- -------------
Income (loss) before extraordinary item 3,222,821 (782,323)
------------- -------------
Extraordinary item:
Gain on forgiveness of debt 2,602,346
------------- -------------
Net income (loss) $ 5,825,167 $ (782,323)
============= =============
Income (loss) before extraordinary item
allocated to General Partner $ 32,229 $ (7,823)
============= =============
Income (loss) before extraordinary item
allocated to Limited Partners $ 3,190,592 $ (774,500)
============= =============
Income (loss) before extraordinary item
per Limited Partnership Interest
(87,037 issued and outstanding) $ 36.65 $ (8.90)
============= =============
Extraordinary item allocated to General
Partner $ 26,023 None
============= =============
Extraordinary item allocated to Limited
Partners $ 2,576,323 None
============= =============
Extraordinary item per Limited Partnership
Interest (87,037 issued and outstanding) $ 29.60 None
============= =============
Net income(loss) allocated to General Partner $ 58,252 $ (7,823)
============= =============
Net income(loss) allocated to Limited Partners$ 5,766,915 $ (774,500)
============= =============
Net income(loss) per Limited Partnership
Interest (87,037 issued and outstanding) $ 66.25 $ (8.90)
============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 84-SERIES II
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
------------- -------------
Operating activities:
Net income $ 3,419,399 $ 10,731,403
Adjustments to reconcile net income to
net cash used in operating activities:
Gain on forgiveness of debt (2,602,346) (1,234,276)
Gain on foreclosure of properties (8,432,686)
Gain on sale of properties (4,257,709) (3,606,825)
Affiliates' participation in losses
from joint ventures (44,860) (74,936)
Depreciation of properties 1,945,451 2,051,714
Amortization of deferred expenses 516,901 344,441
Net change in:
Escrow deposits (5,609) (607,068)
Accounts and accrued interest
receivable (275,319) (262,418)
Accounts payable (47,741) (157,513)
Due to affiliates (51,004) (16,838)
Accrued liabilities 183,182 468,072
Security deposits (71,340) (97,588)
------------- -------------
Net cash used in operating activities (1,290,995) (894,518)
------------- -------------
Investing activities:
Proceeds from sale of properties 17,790,715 9,385,000
Costs incurred in connection with sale of
properties (241,511) (164,056)
------------- ------------
Net cash provided by investing activities 17,549,204 9,220,944
------------- ------------
Financing activities:
Distributions to joint venture
partners - affiliates (83,452) (2,919)
Proceeds from loans payable - affiliate 671,456 866,469
Repayment of loans payable - affiliate (534,073) (1,429,236)
Proceeds from issuance of mortagage notes
payable 7,448,362 13,143,500
Principal payments on purchase price,
promissory and mortgage notes payable (421,069) (467,598)
Repayments of mortgage notes payable (23,693,178) (19,792,049)
Payment of deferred expenses (245,985) (272,503)
------------- -------------
Net cash used in financing activities (16,857,939) (7,954,336)
------------- -------------
Net change in cash and cash equivalents (599,730) 372,090
Cash and cash equivalents at beginning
of year 1,160,704 223,828
------------- -------------
Cash and cash equivalents at end of period $ 560,974 $ 595,918
============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
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, 1994, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1994 and 1993, the Partnership
incurred interest expense on purchase price, promissory and mortgage notes
payable of $5,079,007 and $6,436,559 and paid interest expense of $5,413,075
and $6,080,467, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1994 were:
Paid
--------------------
Nine Months Quarter Payable
----------- -------- ---------
Property management fees $692,907 $233,464 $73,466
Reimbursement of expenses to
the General Partner, at cost:
Accounting 55,266 34,359 26,843
Data processing 28,550 13,295 32,705
Investor processing 8,655 5,381 1,290
Investor communications 7,077 4,400 4,345
Legal 13,924 8,657 8,620
Portfolio management 58,304 34,369 28,359
Other 12,974 8,066 3,903
As of September 30, 1994, the General Partner has advanced $7,913,106 to the
Partnership to provide working capital and meet other Partnership obligations,
including net advances of $137,383 during 1994. During the nine months ended
September 30, 1994 and 1993, the Partnership incurred interest expense in
connection with these loans of $276,264 and $190,779, respectively. The
Partnership paid interest expense of $378,243 and $217,334 during the nine
months ended September 30, 1994 and 1993, respectively. As of September 30,
1994, interest of $37,897 was payable on these advances. Interest was computed
at the American Express Company cost of funds rate plus a spread to cover
administrative expenses. As of September 30, 1994, this rate was 5.36%.
4. Loan Refinancing:
In July 1994, the Partnership completed the refinancing of the loan
collateralized by the Spring Creek Apartments. The refinancing resulted in the
Partnership obtaining a new $7,448,362 first mortgage loan from an unaffiliated
lender. The loan bears interest at 9.21% per annum and monthly principal and
interest payments of $61,060 will be payable through maturity, August 1, 2000.
The Partnership used the proceeds from the new mortgage loan to repay the prior
loan of $7,100,000. The Partnership also paid refinancing costs of $245,985
which will be amortized over the life of the loan.
5. Debt Restructuring and Sale of Properties:
Plans of reorganization related to the Ridgepoint Green and Ridgepoint Way
apartment complexes, located in Dallas, Texas, were confirmed by the Bankruptcy
Court in March 1994 and made effective in April 1994. In accordance with the
plans, the lender's secured claims for the two first mortgage loans were equal
to the outstanding principal balances of the loans, the unpaid interest due
through the effective date of the plans and all legal and other professional
fees incurred by the lender in the bankruptcy proceedings. The total of these
amounts were $9,209,519 and $9,986,005 for Ridgepoint Green and Ridgepoint Way,
respectively. The outstanding principal amounts of the loans were to bear
interest at 8% per annum payable in monthly interest-only installments through
the new maturity date of October 1, 1995.
Under the plans, the Partnership had until maturity to sell the properties to
an unaffiliated party on certain specified terms, and did so during August
1994, in an all cash sale for $17,790,715. From the proceeds of the sale, the
Partnership paid $16,593,178 in full satisfaction of the first mortgage loans
collateralized by the properties, which represents a discount of $2,602,346
from the amounts due under the loans. The Partnership also paid $177,907 to an
unaffiliated party as a brokerage commission and $63,604 in closing costs and
received the remaining proceeds of $956,026. Neither the General Partner nor
its affiliates received a commission in connection with the sale. The bases of
the properties sold were $13,291,495, net of accumulated depreciation of
$5,966,686. The Partnership recognized a gain on this sale of $4,257,709 in the
third quarter financial statements.
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Realty Investors 84-Series II, A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1983 to invest in and operate
income-producing real property. The Partnership raised $87,037,000 through the
sale of Limited Partnership Interests and utilized these proceeds to acquire
fourteen real property investments. Titles to the Southern Hills, Rancho Mirage
and Highland Ridge apartment complexes were relinquished through foreclosure
during January 1990, March 1993 and May 1993, respectively. The Partnership
also sold the Butterfield Village Apartments in April 1993 and the Ridgepoint
Green and Ridgepoint Way apartment complexes in August 1994. The Partnership
continues to operate the eight remaining properties.
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 1993 for a more complete understanding of
the Partnership's financial position.
Operations
- - ----------
Summary of Operations
- - ---------------------
The Ridgepoint Green and Ridgepoint Way apartment complexes were sold in August
1994, the Butterfield Village Apartments were sold in April 1993 and the Rancho
Mirage and Highland Ridge apartment complexes were lost through foreclosure in
March and May of 1993, respectively. In addition, in April 1993, the
Partnership refinanced the loan secured by the Ridgetree II Apartments at a
discount. The timing of the combined effect of the gains related to these
events resulted in a decrease in net income for the nine months ended September
30, 1994 as compared to the same period in 1993, and the recognition of income
during the quarter ended September 30, 1994 as compared to a loss during the
same period in 1993.
1994 Compared to 1993
- - ---------------------
As mentioned above, the Partnership sold the Butterfield Village Apartments in
April 1993 and the Ridgepoint Green and Ridgepoint Way apartment complexes in
August 1994. As a result, the Partnership experienced decreases in rental and
service income, interest expense on purchase price, promissory and mortgage
notes payable, depreciation, real estate taxes and property management fees
during the nine months and quarter ended September 30, 1994 as compared to the
same periods in 1993. Increased occupancy and/or rental rates at five of the
Partnership's remaining properties during the nine months ended September 30,
1994 partially offset the above decrease in rental and service income, and
consequently, property management fees.
As a result of higher average cash balances available for investment and higher
interest rates earned on short-term investments, interest income on short-term
investments increased during the nine months and quarter ended September 30,
1994 as compared to the same periods in 1993.
The loans collateralized by the Ridgepoint Green and Ridgepoint Way apartment
complexes were modified, effective in April 1994. The Partnership had
previously recognized level yield adjustments relating to the interest paid
under the prior terms of these loans. In connection with the modifications, the
Partnership wrote-off approximately $290,000 of these liabilities which, along
with decreased interest rates, contributed to the decrease in interest expense
on purchase price, promissory and mortgage notes payable discussed above. The
Partnership also fully amortized the remaining loan modification fees related
to the 1989 modifications of these loans, which resulted in increased
amortization expense during the nine months ended September 30, 1994 as
compared to the same period in 1993 and decreased amortization expense during
the quarter. In addition, the Partnership was obligated to pay all legal and
other professional fees incurred by the lender in the bankruptcy proceedings
from the cash flow of the properties. These costs were recognized as debt
restructuring expense during the first six months of 1994.
During April, May and December 1993, the loans collateralized by the Ridgetree
II, Meadow Creek and Park Colony apartment complexes were refinanced or
modified. In addition, in accordance with the loan agreements, the interest
rates on the loans collateralized by the Rosehill Pointe and Westwood Village
apartment complexes were adjusted to lower rates during July and October 1993,
respectively. These events contributed to the decreases in interest expense on
purchase price, promissory and mortgage notes payable discussed above.
During the second quarter of 1994, the General Partner made advances to the
Partnership for additional working capital. This, along with higher interest
rates in 1994, resulted in an increase in interest expense on short-term loans
during the nine months and quarter ended September 30, 1994 as compared to the
same periods in 1993.
Due to the sale of the Butterfield Village Apartments and the foreclosure of
the Highland Ridge Apartments, the Partnership fully amortized the remaining
financing fees related to the corresponding mortgage notes payable in 1993.
This partially offset the increase in amortization expense discussed above.
Higher maintenance and repair expense, which included exterior painting and
wood siding replacement, asphalt repairs, plumbing repairs and the replacement
of floor coverings, was incurred at the La Contenta, Meadow Creek, Ridgepoint
Green, Ridgepoint Way, Rosehill Pointe, Seabrook and Spring Creek apartment
complexes during the nine months ended September 30, 1994. The Partnership had
deferred non-critical costs during 1993 at the Ridgepoint Green and Ridgepoint
Way apartment complexes due to the bankruptcy filings. In addition, in
accordance with the terms of the bankruptcy plans, the Partnership completed
exterior painting at these two properties during the second quarter of 1994.
The Partnership also incurred increased insurance expense at several of the
properties. These increases resulted in an increase in property operating
expense for the nine months and quarter ended September 30, 1994 as compared to
the same periods in 1993. These increases were partially offset by the decrease
caused by the sale of the Butterfield Apartments.
During the nine months and quarter ended September 30, 1994, higher real estate
taxes were incurred at the Ridgetree II Apartments as a result of an increased
assessment. This additional expense fully offset the reduction in real estate
tax expense due to the property dispositions discussed above and resulted in an
increase in real estate taxes for the nine months and quarter ended September
30, 1994 as compared to the same periods in 1993.
An increase in accounting and portfolio management fees resulted in an increase
in administrative expense during the nine months and quarter ended September
30, 1994 as compared to the same periods in 1993.
During 1994, Rosehill Pointe Apartments experienced a decrease in interest
expense, as discussed above, and an increase in rental and service income
resulting from increased rental rates. This was partially offset for the nine
months and completely offset for the quarter by increases in maintenance and
repair expense at this property and at the Seabrook Apartments during 1994.
This resulted in a decrease in affiliates' participation in losses from joint
ventures during the nine months ended September 30, 1994 as compared to the
same period in 1993 and an increase in affiliates' participation in losses
during the quarter ended September 30, 1994 as compared to the same period in
1993.
During August 1994 and April 1993, the Partnership recognized a gain of
$4,257,709 on the sale of the Ridgepoint Green and Ridgepoint Way apartment
complexes located in Dallas, Texas and a gain of $3,606,825 on the sale of the
Butterfield Village Apartments located in Tempe, Arizona, respectively.
During the nine months ended September 30, 1994, the Partnership recognized an
extraordinary gain on forgiveness of debt of $2,602,346 in connection with the
August 1994 sale of the Ridgepoint Green and Ridgepoint Way apartment
complexes. During the nine months ended September 30, 1993, the Partnership
recognized an extraordinary gain on forgiveness of debt of $1,234,276 in
connection with the April 1993 refinancing of the Ridgetree II Apartments
located in Dallas, Texas. The Partnership also recognized extraordinary gains
on foreclosures of $8,432,686 in connection with the March 1993 foreclosure of
the Rancho Mirage Apartments located in Phoenix, Arizona and the May 1993
foreclosure of the Highland Ridge Apartments located in Oklahoma City,
Oklahoma.
Liquidity and Capital Resources
- - -------------------------------
The cash or near cash position of the Partnership decreased as of September 30,
1994 when compared to December 31, 1993. The Partnership received funds from
investing activities relating to the sale of the Ridgepoint Green and
Ridgepoint Way apartment complexes in August 1994. The Partnership used cash to
fund certain of its financing activities which included the repayment of the
mortgage notes on the Ridgepoint Green and Ridgepoint Way apartment complexes
in connection with the sale and the payment of principal on the loans
collateralized by the Partnership's properties. In addition, cash was used to
fund the Partnership's operating activities. The revenue generated by the
Partnership's properties was offset by the payment of property operating
expenses, administrative expenses, interest expense on the General Partner loan
and expenditures relating to damage caused by a hail storm at the Ridgepoint
Green and Ridgepoint Way apartment complexes. The Partnership expects to be
reimbursed by its insurance company for the costs of the hail storm damage less
the amount of the deductible portion of the claim.
The Partnership is largely dependent on loans from the General Partner and owes
approximately $7,913,000 to the General Partner at September 30, 1994 in
connection with funds advanced for working capital purposes. These loans are
expected to be repaid from available cash flow from future property operations,
or from proceeds received from the disposition of the Partnership's real estate
investments prior to any distributions to the Limited Partners from these
sources.
The General Partner may continue to provide additional short-term loans to the
Partnership or to fund working capital needs or property operating deficits,
although there is no assurance that such loans will be available. Should such
short-term loans not be available, the General Partner will seek alternative
third party sources of financing working capital. However, the current economic
environment and its impact on the real estate industry make it unlikely that
the Partnership would be able to secure financing from third parties to fund
working capital needs or operating deficits. Should additional borrowings be
needed and not be available either through the General Partner or third
parties, the Partnership may be required to dispose of some of its properties
to satisfy these obligations.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit is
considered to be significant if it exceeds $250,000 annually or 20% of the
property's rental and service income. During the nine months ended September
30, 1994, six of the Partnership's eight remaining properties generated
positive cash flow and two generated a marginal cash flow deficit. During the
nine months ended September 30, 1993, eight of the Partnership's ten remaining
properties generated positive cash flow while two generated marginal cash flow
deficits. As discussed above, the Ridgepoint Green and Ridgepoint Way apartment
complexes were sold in August 1994.
The Park Colony and Westwood Village apartment complexes generated marginal
cash flow deficits during the first nine months of 1993, whereas during the
same period in 1994, the properties generated positive cash flow due to reduced
debt service payments. The loan collateralized by the Park Colony Apartments
was modified in 1993 and the interest rate on the loan collateralized by the
Westwood Village Apartments was adjusted to a lower rate during 1993 in
accordance with the loan agreement. The Ridgetree II Apartments, which
generated positive cash flow during the first nine months of 1993, generated a
marginal cash flow deficit during the same period in 1994 due to higher real
estate taxes resulting from an increased assessment. The Seabrook Apartments,
which generated positive cash flow during the first nine months of 1993,
incurred expenditures for plumbing repairs which caused the property to operate
at a marginal deficit during the same period in 1994.
In July 1994, the first mortgage loan collateralized by the Spring Creek
Apartments was refinanced with a new $7,448,362 first mortgage loan from an
unaffiliated lender. The original loan bore interest at 9.25% and was to mature
in August 1994, whereas the new loan bears interest at 9.21% and matures on
August 1, 2000. See Note 4 of Notes to Financial Statements for additional
information.
The loans collateralized by the Ridgepoint Green and Ridgepoint Way apartment
complexes, located in Dallas, Texas, were modified, effective April 1994.
Pursuant to the modifications, the outstanding principal amounts of the loans
were to bear interest at 8% per annum payable in monthly interest-only
installments through the new maturity date of October 1, 1995. In addition, the
Partnership was obligated to sell the properties on or before the maturity date
on certain specified terms. Consequently, in August 1994, the Partnership sold
the properties in an all cash sale for $17,190,715. After payment of the
underlying mortgages at a discount and selling costs, the Partnership received
proceeds of approximately $956,000 from the sale. A portion of these proceeds
was used to reduce the outstanding short-term borrowings due to the General
Partner. See Note 5 of Notes to Financial Statements for additional
information.
While the cash flow of certain of the Partnership's properties has improved,
the General Partner continues to pursue a number of actions aimed at improving
the cash flow of the Partnership's properties including refinancing of mortgage
loans, improving property operating performance, and seeking rent increases
where market conditions allow. Despite improvements during 1993 and the first
nine months of 1994 in the local economies and rental markets where certain of
the Partnership's properties are located, the General Partner believes that
continued ownership of many of the properties is in the best interests of the
Partnership in order to maximize potential returns to Limited Partners. As a
result, the Partnership will continue to own these properties for longer than
the holding period for the assets originally described in the prospectus.
Each of the Partnership's properties is owned through the use of third-party
mortgage loan financing and, therefore, the Partnership is subject to the
financial obligations required by such loans. As a result of the General
Partner's successful efforts to obtain refinancing of many existing loans with
new lenders, the Partnership has no third-party, first mortgage financing which
matures prior to October 1996.
Westwood Village Apartments is located near the Dallas/Ft. Worth Airport. A
proposed expansion plan provides for the construction of two additional runways
on airport property. A proposed plan provides for varying levels of
compensation to single family homeowners for the expected loss in value of
their homes as a result of increased air traffic and heightened noise levels.
However, no similar compensation is planned for the majority of apartment
complex owners in the area, including the Partnership. In July 1993, the
Partnership and other affected multi-family property owners filed a lawsuit to
obtain equitable compensation. The airport board and the plaintiffs each filed
a motion for summary judgement in March and April 1994, respectively. Court-
ordered mediation between the parties did not result in a resolution and on
October 12, 1994, the airport board's motion for summary judgement was granted.
If the Judgement stands in the airport board's favor, the Partnership would not
receive any compensation as a result of the airport expansion. On October 24,
1994, the plaintiffs filed a motion for a new trial and/or to alter the
judgment based on certain facts not previously considered. This motion is
pending. If the court does not rule in favor of the plaintiffs, the Partnership
will consider its other options including a possible appeal of the summary
judgment.
Although investors have received certain tax benefits, the Partnership has not
commenced distributions. Future distributions will depend on improved cash flow
from the Partnership's remaining properties and proceeds from future property
sales, as to both of which there can be no assurances.
On November 4, 1994, The Balcor Company completed the sale of the assets of
Allegiance Realty Group, Inc. to an unaffiliated company, Insignia Allegiance
Management, Inc. ("Insignia"), which is based in Greenville, South Carolina. As
a result of this transaction, Insignia has assumed the management of the
Partnership's properties. This transaction is not expected to result in any
material change to the property management fees paid by the Partnership.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents depending on general
or local economic conditions. In the long-term, inflation will increase
operating costs and replacement costs and may lead to increased rental revenues
and real estate values.
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
PART II - OTHER INFORMATION
Item 5. Other Information
- - --------------------------
Ridgepoint Green Apartments and Ridgepoint Way Apartments
- - ---------------------------------------------------------
As previously reported, in July 1994, the Partnership executed an agreement to
sell the Ridgepoint Green ("Green") and Ridgepoint Way ("Way") apartment
complexes in Dallas, Texas (together, the "Properties"), for a total sale price
of $17,790,715 to an unaffiliated party, Berkshire Realty Company, Inc., a
Delaware corporation, which subsequently assigned its rights under the
agreement to its affiliate, BRI Ridgepoint Business Trust. The sale closed on
August 30, 1994 ("Closing"). At Closing, the sale price was allocated
$8,505,998 to Green and $9,284,717 to Way. The Partnership paid approximately
$16,593,178 in full satisfaction of the first mortgage loans collateralized by
the Properties, which represented a discount of approximately $2,602,346 from
the amounts due under the loans. The Partnership also paid $177,907 to an
unaffiliated party as a brokerage commission and $63,604 in closing costs and
received the remaining sale proceeds of $956,026.
Two apartment complexes adjacent to the Properties owned by an affiliate of the
General Partner were sold to the purchaser simultaneously with the Properties.
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 2
of the Registrant's Registration Statement on Form S-11 dated May 16, 1984
(Registration No. 2-89319), 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. 0-13334) are incorporated
herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1994 is attached hereto.
(b) Reports on Form 8-K: A Current Report on Form 8-K dated July 8, 1994
reporting the contract to sell the Ridgepoint Green and Ridgepoint Way
apartment complexes located in Dallas, Texas.
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 REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Thomas E. Meador
---------------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Partners-84 II, Inc., the General Partner
By: /s/Allan Wood
---------------------------------
Allan Wood
Executive Vice President, and Chief Accounting
and Financial Officer (Principal Accounting and
Financial Officer) of Balcor Partners-84 II,
Inc., the General Partner
Date: November 14, 1994
---------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 561
<SECURITIES> 0
<RECEIVABLES> 341
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2057
<PP&E> 83022
<DEPRECIATION> 28366
<TOTAL-ASSETS> 57507
<CURRENT-LIABILITIES> 9693
<BONDS> 66127
<COMMON> 0
0
0
<OTHER-SE> 17132
<TOTAL-LIABILITY-AND-EQUITY> 57507
<SALES> 0
<TOTAL-REVENUES> 17547
<CGS> 0
<TOTAL-COSTS> 7602
<OTHER-EXPENSES> 3773
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5355
<INCOME-PRETAX> 817
<INCOME-TAX> 0
<INCOME-CONTINUING> 817
<DISCONTINUED> 0
<EXTRAORDINARY> 2602
<CHANGES> 0
<NET-INCOME> 3419
<EPS-PRIMARY> 38.89
<EPS-DILUTED> 38.89
</TABLE>
