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, 1994
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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 0-13334
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BALCOR REALTY INVESTORS 84-SERIES II
A REAL ESTATE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Maryland 36-3223939
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
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Balcor Realty Investors 84-Series II, A Real Estate Limited Partnership (the
"Registrant") is a limited partnership governed by the laws of the State of
Maryland. The Registrant raised $87,037,000 from sales of Limited Partnership
Interests. The Registrant's operations consist exclusively of investment in and
operation of income-producing real properties, and all financial information
included in this report relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire fourteen real
property investments. The Registrant has since disposed of six of these
properties. As of December 31, 1994, the Registrant owned the remaining eight
properties described under "Properties" (Item 2). The Partnership Agreement
generally provides that the proceeds of any sale or refinancing of the
Registrant's properties will not be reinvested in new acquisitions.
During 1994, institutionally owned and managed multi-family residential
properties in many markets continued to experience favorable operating
conditions. These favorable operating conditions were supported by the strong
pattern of national economic growth which contributed to job growth and rising
income levels in most local economies. However, some rental markets continue to
remain extremely competitive; therefore, the General Partner's goals are to
maintain high occupancy levels, while increasing rents where possible, and to
monitor and control operating expenses and capital improvement requirements at
the properties. As discussed in Item 7. Liquidity and Capital Resources, of the
Registrant's eight remaining properties, during 1994, six generated positive
cash flow while two generated marginal cash flow deficits.
Historically, real estate investments have experienced the same cyclical
characteristics affecting most other types of long-term investments. While real
estate values have generally risen over time, the cyclical character of real
estate investments, together with local, regional and national market
conditions, has resulted in periodic devaluations of real estate in particular
markets, as has been experienced in the last few years. As a result of these
factors, it has become necessary for the Registrant to retain ownership of many
of its properties for longer than the holding period for the assets originally
described in the prospectus. The General Partner examines the operations of
each property and each local market individually when determining the optimal
time to sell each of the Registrant's properties.
In March 1994, the Registrant completed the modification of the Ridgepoint
Green and Ridgepoint Way first mortgage loans effective April 1994. The
Registrant was obligated to sell the properties on or before October 1, 1995 on
certain specified terms. Consequently, in August 1994, the Registrant sold the
properties. See Item 7. Liquidity and Capital Resources for additional
information.
During 1994, the Registrant refinanced the Spring Creek first mortgage loan.
See Item 7. Liquidity and Capital Resources for additional information.
The Registrant, by virtue of its ownership of real estate is subject to federal
and state laws and regulations covering various environmental issues.
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental issues and to conduct tests for
environmental contamination as appropriate. The General Partner is not aware
of any potential liability due to environmental issues or conditions that would
be material to the Registrant.
The officers and employees of Balcor Partners-84 II, Inc., the General Partner
of the Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
<PAGE>
Item 2. Properties
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As of December 31, 1994, the Registrant owns the eight properties described
below:
Location Description of Property
- -------- -----------------------
Tempe, Arizona La Contenta Apartments: a 274-unit apartment
complex located on approximately 13 acres.
Pineville, North Carolina * Meadow Creek Apartments: a 250-unit apartment
complex located on approximately 23 acres.
Gwinnett County, Georgia Park Colony Apartments: a 352-unit apartment
complex located on approximately 29 acres.
Dallas, Texas Ridgetree Apartments (Phase II): a 354-unit
apartment complex located on approximately 9
acres.
Lenexa, Kansas ** Rosehill Pointe Apartments: a 498-unit apartment
complex located on approximately 35 acres.
Orange County, Florida ** Seabrook Apartments: a 200-unit apartment complex
located on approximately 16 acres.
Columbus, Ohio Spring Creek Apartments: a 288-unit apartment
complex located on approximately 19 acres.
Irving, Texas Westwood Village Apartments: a 320-unit apartment
complex located on approximately 16 acres.
* Owned by the Registrant through a joint venture with the seller.
** Owned by the Registrant through a joint venture with one or more
affiliated partnerships.
Each of the above properties is held subject to various mortgages and other
forms of financing.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding real property
investments.
Item 3. Legal Proceedings
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The Registrant is not subject to any material pending legal proceedings, nor
were any such proceedings terminated during the fourth quarter of 1994.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of the Limited Partners of the Registrant
during 1994.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
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Matters
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There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop; therefore, the
market value of the Limited Partnership Interests cannot reasonably be
determined. The Registrant has not made distributions to date to investors. For
additional information, see Item 7. - "Management's Discussion and Analysis of
Financial Condition and Results of Operations" below.
As of December 31, 1994, the number of record holders of Limited Partnership
Interests of the Registrant was 8,499.
Item 6. Selected Financial Data
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Year ended December 31,
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1994 1993 1992 1991 1990
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Total income $17,020,543 $17,984,872 $21,928,782 $21,284,255 $21,254,053
(Loss) before gains
on sales of assets
and extraordinary
items (3,313,544) (3,371,970) (5,099,275) (5,662,553) (5,484,230)
Net income (loss) 2,454,938 9,901,817 (5,099,275) (5,662,553) (5,484,230)
Net income (loss)
per Limited Part-
nership Interest 27.92 112.63 (58.00) (64.41) (62.38)
Total assets 56,636,602 73,333,165 100,416,387 104,489,888 110,712,217
Mortgage notes
payable 65,971,823 84,130,907 120,086,011 120,708,225 122,370,278
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Summary of Operations
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Balcor Realty Investors 84 - Series II (the "Partnership") sold two properties
in August 1994 and an additional property in April 1993. In addition, the
Partnership recognized an extraordinary gain on forgiveness of debt relating to
the repayment of the mortgage notes in connection with the 1994 property sales
and extraordinary gains on two other properties that were lost through
foreclosure in March and May of 1993. Finally, in April 1993, the Partnership
refinanced the Ridgetree II first mortgage loan at a discount. The timing of
the gains related to these events resulted in a decrease in net income during
1994 as compared to 1993, and net income in 1993 as compared to a net loss in
1992. Further discussion of the Partnership's operations are summarized below.
Operations
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1994 Compared to 1993
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The Partnership sold the Butterfield Village Apartments in April 1993 and the
Ridgepoint Green and Ridgepoint Way apartment complexes in August 1994. As a
<PAGE>
result, the Partnership experienced decreases in rental and service income,
interest expense on mortgage notes payable, depreciation, and property
management fees during 1994 as compared to 1993. Increased occupancy and/or
rental rates at five of the Partnership's remaining properties partially offset
the above decrease in rental and service income and, consequently, property
management fees.
The Ridgepoint Green and Ridgepoint Way first mortgage loans were modified,
effective April 1994. The Partnership had previously recognized interest
expense liabilities 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 mortgage notes payable discussed above. During
April, May and December 1993, the Ridgetree II, Meadow Creek and Park Colony
loans were refinanced or modified. In addition, in accordance with the loan
agreements, the interest rates on the Rosehill Pointe and Westwood Village
loans were adjusted to lower rates during July and October 1993, respectively.
These events also contributed to the decrease.
During 1994, the General Partner made net 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 1994 as
compared to 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.
Insurance premiums increased at all of the Partnership's properties. This,
along with higher utility, payroll, and advertising costs at the La Contenta,
Ridgetree II, Rosehill Pointe, Seabrook, Spring Creek, and Westwood Village
apartment complexes caused an increase in property operating expense during
1994 as compared to 1993. This was partially offset by a decrease in property
operating expense due to the property dispositions discussed above.
Higher maintenance and repair expense, which included exterior painting and
wood siding replacement, asphalt repairs, landscaping improvements, plumbing
repairs and the replacement of floor coverings, was incurred at the La
Contenta, Meadow Creek, Park Colony, Ridgepoint Green, Ridgepoint Way, Seabrook
and Spring Creek apartment complexes during 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 1994. These increases were partially
offset by the decrease caused by the sale of the Butterfield Apartments in
1993.
During 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 1994 as compared to 1993.
An increase in legal fees relating to the Ridgepoint Green and Ridgepoint Way
loan modifications, and higher accounting, portfolio management, and data
processing fees resulted in an increase in administrative expense during 1994
as compared to 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 and a gain of $3,606,825 on the sale of the Butterfield Village
Apartments, respectively.
During 1994, the Partnership recognized an extraordinary gain on forgiveness of
debt of $1,510,773 in connection with the August 1994 sale of the Ridgepoint
<PAGE>
Green and Ridgepoint Way apartment complexes. During 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. The
Partnership also recognized extraordinary gains on foreclosures totaling
$8,432,686 in connection with the foreclosures of the Rancho Mirage and
Highland Ridge apartments complexes in March 1993 and May 1993, respectively.
1993 Compared to 1992
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The Partnership sold the Butterfield Village Apartments in April 1993 and did
not record operations during 1993 for the Highland Ridge and Rancho Mirage
apartment complexes as a result of their receivership status. As a result, the
Partnership experienced decreases in rental and service income, interest
expense on mortgage notes payable, depreciation, property operating expense,
maintenance and repair expense, real estate taxes and property management fees
during 1993 as compared to 1992. Increased occupancy levels and/or rental rates
at seven of the Partnership's properties during 1993 partially offset the above
decrease in rental and service income, and consequently, property management
fees.
The Seabrook mortgage loan was originally financed by a bond issuance which
matured in 1992. During the third quarter of 1992, the Partnership received
interest income from the trustee of the bonds. This, as well as lower interest
rates earned on short-term investments in 1993, resulted in a decrease in
interest income on short-term investments during 1993 as compared to 1992.
In May and June 1992, the Partnership reached settlements with the sellers of
the Rosehill Pointe and Ridgetree II apartment complexes. As a result,
settlement income of $273,294 was recognized in connection with these
transactions during 1992.
During July 1992 and April and May 1993, the Seabrook, Ridgetree II and Meadow
Creek loans were refinanced. In addition, in accordance with the loan
agreements, the interest rates on the Rosehill Pointe and Westwood Village
loans were adjusted to lower rates during July and October 1993, respectively.
These events contributed to the decrease in interest expense on mortgage notes
payable during 1993 as compared to 1992.
Due to the sale of the Butterfield Village Apartments and the foreclosure of
the Highland Ridge Apartments, as well as the Ridgetree II and Meadow Creek
refinancings and the Park Colony modification, the Partnership fully amortized
the remaining financing fees related to the corresponding mortgage notes
payable during 1993. This resulted in an increase in amortization expense
during 1993 as compared to 1992.
Increased administrative and maintenance staff payroll expenses at the Rosehill
Pointe and Spring Creek apartment complexes during 1993 partially offset the
decrease in property operating expense discussed above.
During 1992, the Partnership incurred substantial expenditures for painting and
cleaning and carpet replacement at the Park Colony Apartments in an effort to
lease vacant units. In addition, the Partnership deferred non-critical
maintenance and repair costs during 1993 at the Ridgepoint Green and Ridgepoint
Way apartment complexes due to the bankruptcy filings. This contributed to the
decrease in maintenance and repair expense during 1993 as compared to 1992.
During 1993, higher real estate taxes were incurred at the Meadow Creek, Spring
Creek and Westwood Village apartment complexes as a result of increased tax
rates and/or assessments. The additional expense partially offset the reduction
in real estate tax expense due to the property dispositions discussed above and
lower assessment at the La Contenta Apartments.
During 1993, Rosehill Pointe Apartments experienced an increase in rental rates
and a decrease in interest expense, as discussed above. This improvement in
operations resulted in a decrease in the affiliates' participation in losses
<PAGE>
from joint ventures during 1993 as compared to 1992. In addition, interest
income received during the third quarter of 1992 from the trustee of the bonds,
which were collateralized by the Seabrook Apartments and matured in 1992,
offset the above decrease.
Liquidity and Capital Resources
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The cash position of the Partnership decreased as of December 31, 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 Ridgepoint
Green and Ridgepoint Way first mortgage loans in connection with the sale and
the payment of principal on the Partnership's loans. 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 has loans of approximately $8,109,000 payable to the General
Partner at December 31, 1994 in connection with funds advanced for working
capital purposes and for property operating deficits. 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 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.
In instances where the General Partner concludes that the Partnership's
investment objectives cannot be met by continuing to own a particular property
and fund operating deficits, the Partnership has suspended and may in the
future suspend debt service payments or sell the property at a price less than
its original cost. Suspension of debt service payments may lead to a
renegotiation of terms with lenders which would permit the Partnership to
continue to own properties or may lead to foreclosure or other action by
lenders which would result in the relinquishment of title to properties in
satisfaction of the outstanding mortgage loan balances. In the case of each
property, the General Partner will pursue modification of underlying debt,
consider suspending debt service payments and/or deferring non-critical repair
and maintenance costs and analyze present and projected market conditions and
projections for operations prior to determining the disposition of a property.
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. The Partnership defines cash flow
generated from its properties as an amount equal to the property's revenue
receipts less property related expenditures, which include debt service
payments. During 1994, six of the Partnership's eight remaining properties
generated positive cash flow and two generated a marginal cash flow deficit.
<PAGE>
During 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 1993, whereas during 1994, the properties generated
positive cash flow due to reduced debt service payments. The Park Colony loan
was modified in 1993 and the interest rate on the Westwood Village loan was
adjusted to a lower rate during 1993 in accordance with the loan agreement. The
Ridgetree II Apartments, which generated positive cash flow during 1993,
generated a marginal cash flow deficit during 1994 due to higher real estate
taxes resulting from an increase in the assessed value of the property. The
Seabrook Apartments, which generated positive cash flow during 1993, incurred
expenditures for plumbing repairs and higher debt service payments due to
increased interest rates which caused the property to operate at a marginal
deficit during 1994.
During July 1994, the Spring Creek first mortgage loan was refinanced. See Note
3 of Notes to Financial Statements for additional information.
The Ridgepoint Green and Ridgepoint Way first mortgage loans were modified,
effective April 1994. Pursuant to the modifications, the Partnership was
obligated to sell the properties on or before the new October 1, 1995 maturity
date on certain specified terms. Consequently, in August 1994, the Partnership
sold the properties in an all cash sale for $17,790,715. 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 owed to the General
Partner. See Notes 9 and 10 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. As of December 31, 1994, the occupancy rates of
the Partnership's properties ranged from 93% to 98%, except Meadow Creek
Apartments which had an occupancy rate of 89%. Despite improvements during 1993
and 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 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 plan proposed by the Dallas/Fort Worth International
Airport Board provides for varying levels of compensation to single family
homeowners; however, no similar compensation is planned for the majority of
apartment complex owners, including the property. In July 1993, the
Partnership and other affected multi-family property owners filed a lawsuit
seeking to obtain compensation. In October 1994, the airport board's motion for
summary judgment was granted. The plaintiffs filed a motion for a new trial
and/or to alter the judgment, which was denied in November 1994. As a result,
the Partnership is not entitled to receive any compensation due to the airport
expansion. The plaintiffs have decided not to appeal the decision due to the
costs of continuing the litigation, but intend to continue to monitor the
<PAGE>
situation. Westwood Village Apartments, however, may be entitled to be
reimbursed for the costs of soundproofing under the Final Environmental Impact
Statement approved by the Federal Aviation Administration. However, a final
determination will not be made until the runways are completed and actual noise
studies are analyzed.
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. In light of the results
to date and current market conditions, the General Partner does not anticipate
that the investors will recover a substantial portion of their investment.
The General Partner has recently completed the outsourcing of the financial
reporting and accounting services, transfer agent and investor records
services, and computer operations and systems development functions that
provided services to the Partnership. All of these functions are now being
provided by independent third parties. Additionally, Allegiance Realty Group,
Inc., which has provided property management services to all of the
Partnership's properties, was sold to a third party. Each of these transactions
occurred after extensive due diligence and competitive bidding processes. The
General Partner does not believe that the cost of providing these services to
the Partnership, in the aggregate, will be materially different to the
Partnership during 1995 when compared to 1994.
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.
Item 8. Financial Statements and Supplementary Data
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See Index to Financial Statements and Schedule 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, 1994 December 31, 1993
------------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
---------- --------- ---------- ---------
Total assets $ 56,636,602$ 41,311,618 $ 73,333,165 $ 53,841,280
Partners' capital
accounts (deficit):
General Partner (937,975)(11,183,177) (962,524) (10,521,827)
Limited Partners (17,158,670)(18,151,946) (19,589,059) (25,523,423)
Net income (loss):
General Partner 24,549 (661,350) 99,018 1,323,647
Limited Partners 2,430,389 7,371,477 9,802,799 18,354,775
Per Limited Part-
nership Interest 27.92 84.69 112.63 210.88
Item 9. Changes in and Disagreements with Accountants on Accounting and
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Financial Disclosure
- --------------------
<PAGE>
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
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(a) The Registrant does not have a Board of Directors; however, Balcor
Partners-84 II, Inc., the General Partner, does have a Board of Directors which
consists of Thomas Meador and Allan Wood. The term of office as a director of
the General Partner is one year. Directors are elected at the annual meeting of
shareholders.
The directors of Balcor Partners-84 II, Inc., the General Partner of the
Registrant, are not directors in any company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the requirements of Section 15 (b) of the Act or any company
registered as an investment company under the Investment Company Act of 1940.
Messrs Meador and Wood are, however, directors of general partners of three
other issuers, which have a class of securities registered pursuant to Section
12 of the Securities Exchange Act of 1934.
(b, c & e) The names, ages and business experiences of the executive officers,
directors and significant employees of the General Partner of the Registrant
are as follows:
TITLE OFFICERS
----- --------
Chairman, President and Chief Thomas E. Meador
Executive Officer
Executive Vice President, Allan Wood
Chief Financial Officer and
Chief Accounting Officer
Senior Vice President Alexander J. Darragh
First Vice President Daniel A. Duhig
First Vice President Josette V. Goldberg
First Vice President Alan G. Lieberman
First Vice President Brian D. Parker
and Assistant Secretary
First Vice President John K. Powell, Jr.
First Vice President Reid A. Reynolds
First Vice President Thomas G. Selby
Thomas E. Meador (July 1947) 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 Director of The Balcor Company.
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.
Allan Wood (January 1949) joined Balcor in August 1983 and, as Balcor's Chief
Financial Officer and Chief Accounting Officer, is responsible for the
financial and administrative functions. He is also a Director of The Balcor
Company. Mr. Wood is a Certified Public Accountant. Prior to joining Balcor,
he was employed by Price Waterhouse where he was involved in auditing public
and private companies.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and has
primary responsibility for the Portfolio Advisory Group. He is responsible for
due diligence analysis and real estate advisory services in support of asset
management, institutional advisory and capital markets functions. Mr. Darragh
<PAGE>
has supervisory responsibility of Balcor's Investor Services, Investment
Administration, Fund Management and Land Management departments. Mr. Darragh
received masters' degrees in Urban Geography from Queens's University and in
Urban Planning from Northwestern University.
Daniel A. Duhig (October 1956) joined Balcor in November 1986 and is
responsible for the Asset Management Department relating to real estate
investments made by Balcor and its affiliated partnerships, including
negotiations for modifications or refinancings of real estate mortgage
investments and the disposition of real estate investments.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary
responsibility for all human resources matters. In addition, she has
supervisory responsibility for Balcor's administrative and MIS departments.
Ms. Goldberg has been designated as a Senior Human Resources Professional
(SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
the Property Sales and Capital Markets Groups. Mr. Lieberman is a Certified
Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and is responsible for
Balcor's corporate and property accounting, treasury and budget activities.
Mr. Parker is a Certified Public Accountant and holds an M.S. degree in
Accountancy from DePaul University.
John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is
responsible for the administration of the investment portfolios of Balcor's
partnerships and for Balcor's risk management functions. Mr. Powell received a
Master of Planning degree from the University of Virginia. He has been
designated a Certified Real Estate Financier by the National Society for Real
Estate Finance and is a full member of the Urban Land Institute.
Reid A. Reynolds (April 1950) joined Balcor in March 1981 and is involved with
the asset management of residential properties for Balcor. Mr. Reynolds is a
licensed Real Estate Broker in the State of Illinois.
Thomas G. Selby (July 1955) joined Balcor in February 1984 and has
responsibility for various Asset Management functions, including oversight of
the residential portfolio. From January 1986 through September 1994, Mr. Selby
was Regional Vice President and then Senior Vice President of Allegiance Realty
Group, Inc., an affiliate of Balcor providing property management services.
Mr. Selby was responsible for supervising the management of residential
properties in the western United States.
(d) There is no family relationship between any of the foregoing officers or
directors.
(f) None of the foregoing officers, directors or employees are currently
involved in any material legal proceedings nor were any such proceedings
terminated during the fourth quarter of 1994.
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. Certain of these
officers receive compensation from The Balcor Company 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.
<PAGE>
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 Partners-84 II, Inc. and its shareholders, directors, and officers
own as a group the following Limited Partnership Interests in the Registrant.
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------- ----------------
Limited Partnership
Interests 95 Interests Less than 1%
Relatives and affiliates of the partners and officers of the General Partner
own 46 Interests.
(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
- -------------------------------------------------------
(a & b) See Note 2 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 8 of Notes to Financial Statements for additional information relating
to transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
- -------------------------------------------------------------------------
(a)
(1 & 2) See Index to Financial Statements and Financial Statement Schedule in
this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership
is set forth as Exhibit 3 to Amendment No. 2 to Registrant's Registration
Statement on Form S-11 dated July 6, 1984 (Registration No. 2-89319), and said
Agreement and Certificate is incorporated herein by reference.
(4) Form of Subscription Agreement and Power of Attorney set forth as
Exhibit 4.1 to Amendment No. 2 of the Registrant's Registration Statement on
Form S-11 dated July 6, 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.
(10) Material Contracts
Agreement of Sale relating to the sale of Ridgepoint Green and Ridgepoint Way
apartment complexes, Dallas, Texas, previously filed as Exhibit (2) to the
Registrant's Report on Form 8-K dated July 8, 1994 is incorporated herein by
<PAGE>
reference.
(27) Financial Data Schedule of the Registrant for 1994 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1994.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: See Index to Financial Statements and
Financial Statement Schedule in this Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/Allan Wood
------------------------
Allan Wood
Executive Vice President, Chief
Accounting and Financial Officer
and Director (Principal Accounting
and Financial Officer) of Balcor
Partners-84 II, Inc., the General
Partner
Date: March 23, 1995
------------------
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, Chief Executive Officer
(Principal Executive Officer) and
Director of Balcor Partners-84 II,
/s/Thomas E. Meador Inc., the General Partner March 23, 1995
- -------------------- --------------
Thomas E. Meador
Executive Vice President, and Chief
Accounting and Financial Officer
and Director (Principal Accounting
and Financial Officer) of Balcor
Partners-84 II, Inc., the General
/s/Allan Wood Partner March 23, 1995
- -------------------- --------------
Allan Wood
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Deficit, for the years ended December 31, 1994, 1993
and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993
and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1994
Financial Statement Schedules, other than that listed, 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 Realty Investors 84-Series II
A Real Estate Limited Partnership:
We have audited the financial statements and the financial statement schedule
of Balcor Realty Investors 84-Series II, A Real Estate Limited Partnership (A
Maryland Limited Partnership) as listed in the index of this Form 10-K. These
financial statements and the financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Realty Investors
84-Series II, A Real Estate Limited Partnership at December 31, 1994 and 1993,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P
Chicago, Illinois
February 27, 1995
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
------------- -------------
Cash and cash equivalents $ 325,412 $ 1,160,704
Escrow deposits 1,094,558 1,149,671
Accounts and accrued interest receivable 364,052 65,276
Deferred expenses, net of accumulated
amortization of $585,255 in 1994 and
$1,084,192 in 1993 743,815 1,064,613
------------- -------------
2,527,837 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 28,913,579 32,387,624
------------- -------------
Investment in real estate, net of accumulated
depreciation 54,108,765 69,892,901
------------- -------------
$ 56,636,602 $ 73,333,165
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Loans payable - affiliate $ 8,108,555 $ 7,775,723
Accounts payable 170,393 115,493
Due to affiliates 258,657 268,432
Accrued liabilities, principally interest
and real estate taxes 1,131,065 2,274,720
Security deposits 293,922 372,855
Mortgage notes payable 65,971,823 84,130,907
------------- -------------
Total liabilities 75,934,415 94,938,130
Affiliates' participation in joint ventures (1,201,168) (1,053,382)
Partners' deficit (87,037 Limited Partnership
Interests issued and outstanding) (18,096,645) (20,551,583)
------------- -------------
$ 56,636,602 $ 73,333,165
============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
STATEMENTS OF PARTNERS' DEFICIT
for the years ended December 31, 1994, 1993 and 1992
Partners' Deficit Accounts
-----------------------------------------
General Limited
Total Partner Partners(A)
------------- ------------- -------------
Balance at December 31, 1991 $(25,354,125) $ (1,010,549) $(24,343,576)
Net loss for the year
ended December 31, 1992 (5,099,275) (50,993) (5,048,282)
------------- ------------- -------------
Balance at December 31, 1992 (30,453,400) (1,061,542) (29,391,858)
Net income for the year
ended December 31, 1993 9,901,817 99,018 9,802,799
------------- ------------- -------------
Balance at December 31, 1993 (20,551,583) (962,524) (19,589,059)
Net income for the year
ended December 31, 1994 2,454,938 24,549 2,430,389
------------- ------------- -------------
Balance at December 31, 1994 $(18,096,645) $ (937,975) $(17,158,670)
============= ============= =============
(A) Includes a $95,000 investment by the General Partner.
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 years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------- -------------
Income:
Rental and service $ 16,985,963 $ 17,953,526 $ 21,494,257
Interest on short-term
investments 34,580 31,346 161,231
Settlement income 273,294
------------- ------------- -------------
Total income 17,020,543 17,984,872 21,928,782
------------- ------------- -------------
Expenses:
Interest on mortgage notes
payable 6,514,973 8,287,777 10,864,977
Interest on short-term loans 399,006 290,389 281,481
Depreciation 2,492,641 2,712,857 3,573,761
Amortization of deferred
expenses 211,246 441,513 271,755
Property operating 4,968,623 4,729,076 6,092,794
Maintenance and repairs 2,462,717 1,838,831 2,613,933
<PAGE>
Real estate taxes 1,639,635 1,553,880 1,708,931
Property management fees 850,097 893,859 1,047,321
Administrative 870,872 679,625 653,998
------------- ------------- -------------
Total expenses 20,409,810 21,427,807 27,108,951
------------- ------------- -------------
Loss before gain on sale of
properties, participations in
joint ventures and
extraordinary items (3,389,267) (3,442,935) (5,180,169)
Gain on sale of properties 4,257,709 3,606,825
Affiliates' participation in
losses from joint ventures 75,723 70,965 80,894
------------- ------------- -------------
Income (loss) before
extraordinary items 944,165 234,855 (5,099,275)
------------- ------------- -------------
Extraordinary items:
Gain on forgiveness of debt 1,510,773 1,234,276
Gain on foreclosure of
properties 8,432,686
------------- ------------
Total extraordinary items 1,510,773 9,666,962
------------- ------------- -------------
Net income (loss) $ 2,454,938 $ 9,901,817 $ (5,099,275)
============= ============= =============
Income (loss) before
extraordinary items allocated
to General Partner $ 9,441 $ 2,349 $ (50,993)
============= ============= =============
Income (loss) before
extraordinary items allocated
to Limited Partners $ 934,724 $ 232,506 $ (5,048,282)
============= ============= =============
Income (loss) before
extraordinary items per
Limited Partnership Interest
(87,037 issued and
outstanding) $ 10.74 $ 2.68 $ (58.00)
============= ============= =============
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 years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- ------------- -------------
Operating activities:
Net income (loss) $ 2,454,938 $ 9,901,817 $ (5,099,275)
Adjustments to reconcile net
income (loss) to net cash
used in operating activities:
Gain on forgiveness of debt (1,510,773) (1,234,276)
Gain on foreclosure of
properties (8,432,686)
Gain on sale of properties (4,257,709) (3,606,825)
<PAGE>
Affiliates' participation
in losses from joint
ventures (75,723) (70,965) (80,894)
Depreciation of properties 2,492,641 2,712,857 3,573,761
Amortization of deferred
expenses 211,246 441,513 271,755
Deferred interest expense 689,421
Net change in:
Escrow deposits 55,113 (360,723) 1,166
Accounts and accrued
interest receivable (298,776) 165,444 81,663
Accounts payable 54,900 (185,544) (467,175)
Due to affiliates (9,775) 99,586 15,662
Accrued liabilities (615,274) 341,199 (218,889)
Security deposits (78,933) (102,146) (17,016)
------------- ------------- -------------
Net cash used in operating
activities (1,578,125) (330,749) (1,249,821)
------------- ------------- -------------
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:
Capital contributions by joint
venture partners -
affiliates 17,320 114,741
Distributions to joint venture
partners - affiliates (89,383) (25,037) (82,416)
Proceeds from loans payable -
affiliate 866,905 1,086,469 2,383,975
Repayment of loans payable -
affiliate (534,073) (1,429,236)
Proceeds from issuance of
mortgage notes payable 7,448,362 13,236,340
Principal payments on mortgage
notes payable (576,339) (614,974) (1,311,635)
Repayments of mortgage notes
payable (23,693,178) (19,792,049)
Payment of deferred expenses (245,985) (414,832) (58,585)
------------- ------------ ------------
Net cash (used in) or provided
by financing activities (16,806,371) (7,953,319) 1,046,080
------------- ------------ ------------
Net change in cash and cash
equivalents (835,292) 936,876 (203,741)
Cash and cash equivalents at
beginning of year 1,160,704 223,828 427,569
------------- ------------- -------------
Cash and cash equivalents at
end of year $ 325,412 $ 1,160,704 $ 223,828
============= ============= =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) Depreciation expense is computed using the straight-line and accelerated
methods. Rates used in the determination of depreciation are based upon the
following estimated useful lives:
Years
-----
Buildings, building appurtenances
and land improvements 30
Furniture and fixtures 5
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account.
Interest incurred while properties were under construction was capitalized.
The Partnership records its investments in real estate at cost, and
periodically assesses possible impairment to the value of its properties. In
the event that the General Partner determines that a permanent impairment in
value has occurred, the carrying basis of the property is reduced to its
estimated fair value.
(b) Deferred expenses consist of loan refinancing and modification fees which
are amortized over the terms of the respective loan agreements.
(c) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(d) 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.
2. Partnership Agreement:
The Partnership was organized in February 1983. The Partnership Agreement
provides for Balcor Partners-84 II, Inc. to be the General Partner and for the
admission of Limited Partners through the sale of up to 110,000 Limited
Partnership Interests at $1,000 per Interest, 87,037 of which were sold on or
prior to September 28, 1984, 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. One hundred percent of Net Cash Receipts available for
distribution shall be distributed to the holders of Interests in proportion to
their participating percentages as of the record date for such distributions.
However, there shall be accrued for the benefit of the General Partner as its
distributive share from operations, an amount equivalent to approximately 1% of
the total Net Cash Receipts being distributed, which will be paid only out of
Net Cash Proceeds. Under certain circumstances, the General Partner may
participate in the Net Cash Proceeds of the sale or refinancing of Partnership
properties. The General Partner's participation is limited to 15% of Net Cash
Proceeds, including its share of accrued Net Cash Receipts, and is subordinated
to the return of Original Capital plus any deficiency in a Cumulative
Distribution of 6% on Adjusted Original Capital to the holders of Interests, as
defined in the Partnership Agreement.
<PAGE>
3. Mortgage Notes Payable:Mortgage notes payable at December 31, 1994 and 1993
consisted of the following:
<TABLE>
<CAPTION> Carrying Carrying
Amount Amount Current Current Estimated Final
Property Pledged of Notes at of Notes at Interest Monthly Balloon Maturity
as Collateral 12/31/94 12/31/93 Rate Payment Payment Date
----------------- ---------- ---------- -------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Apartment Complexes:
La Contenta $ 7,119,382 $ 7,194,869 9.50% $ 62,634 $ 6,933,000 1996
Meadow Creek (A) 5,141,497 5,182,477 8.54% 40,131 4,972,000 1998
Park Colony (B) 9,975,000 9,975,000 9.375% 78,125 9,753,000 1999
Ridgepoint Green (C) 8,579,085
Ridgepoint Way (C) 9,352,022
Ridgetree (Phase II)(D) 7,868,144 7,914,857 10.05% 70,004 7,529,000 2000
Rosehill Pointe 14,750,078 15,000,906 7.875% 117,886 13,619,000 1998
1,344,000(E) 1,344,000 9.75% 14,238 1,206,000 1998
Seabrook 5,081,898 5,081,898 10.85% 45,949 5,082,000 1997
Spring Creek (F) 7,420,202 7,091,610 9.21% 61,060 7,076,000 2000
Westwood Village 7,271,622 7,414,183 6.498% 52,333 6,612,000 1998
------------ ------------
Total $65,971,823 $84,130,907
============ ============
</TABLE>See notes (A) through (F).
<PAGE>
(A) In May 1993, this loan was refinanced. The interest rate decreased from 10%
to 8.54%, the maturity date was extended from September 1993 to June 1998 and
the monthly payments decreased from $46,444 to $40,131. Proceeds from the new
$5,200,000 first mortgage loan were used to repay the existing first mortgage
loan of $5,178,672.
(B) In December 1993, this loan was modified. The interest rate decreased from
10.25% to 9.375%, the maturity date was extended from July 1996 to January
1999, and monthly payments decreased from $92,223 to $78,125.
(C) Plans of reorganization related to these loans were confirmed by the
Bankruptcy Court in March 1994 and made effective in April 1994. The lender's
secured claims for these loans totaled $19,195,524 which equaled the
outstanding principal balances of the loans, unpaid interest through the
effective date of the plans and legal and professional fees incurred by the
lender in the bankruptcy proceedings. The outstanding principal amount of the
loans were to bear interest at 8% through the new maturity date of October 1,
1995. Under the plans, the Partnership had until maturity to sell the
properties on certain specified terms, and did so during August 1994. See Notes
9 and 10 of Notes to Financial Statements for additional information.
(D) In April 1993, this loan was refinanced. The interest rate decreased from
11.00% to 10.05%, the maturity date was extended from August 1996 to May 2000
and monthly payments decreased from $83,300 to $70,004. Proceeds from the
$7,784,630 first mortgage loan and the $158,870 second mortgage loan, along
with a principal payment of $400,302, were used to repay the existing
$9,578,078 first mortgage loan which represents a discount of $1,234,276.
(E) In January 1995, this loan was modified. The interest rate remained at
9.75%, the maturity date was extended from January 1995 to January 1998, and
the monthly payments of $10,920 increased to $14,238.
(F) In July 1994, this loan was refinanced. The interest rate decreased from
9.25% to 9.21%, the maturity date was extended from August 1994 to August 2000,
and the monthly payments increased from $54,729 to $61,060. Proceeds from the
new $7,448,362 first mortgage loan were used to repay the existing first
mortgage loan of $7,100,000.
The Partnership's loans described above require current monthly payments of
principal and interest except for the Park Colony and Seabrook mortgage loans
which require interest only payments.
Five-year maturities of the mortgage notes payable are approximately as
follows:
1995 $ 700,000
1996 7,738,000
1997 5,891,000
1998 26,912,000
1999 9,903,000
During 1994, 1993 and 1992, the Partnership incurred interest expense on
mortgage notes payable of $6,514,973, $8,287,777 and $10,864,977 and paid
interest expense of $6,863,768, $7,888,588 and $10,255,657, respectively.
4. Management Agreements:
As of December 31, 1994, all of the properties owned by the Partnership are
under management agreements with a third party management company. These
management agreements provide for annual fees of 5% of gross operating
receipts.
5. Seller's Participation in Joint Venture:
Meadow Creek Apartments is owned by a joint venture between the Partnership and
the seller. The seller retains an interest in the property through an interest
<PAGE>
in the joint venture. All assets, liabilities, income and expenses of the joint
venture are included in the financial statements of the Partnership with the
appropriate deduction from income, if any, for the seller's participation in
the joint venture.
6. Affiliates' Participation in Joint Ventures:
Rosehill Pointe Apartments is owned by a joint venture between the Partnership
and an affiliated partnership. Profits and losses are allocated 61.62% to the
Partnership and 38.38% to the affiliate. In addition, Seabrook Apartments is
owned by a joint venture between the Partnership and two affiliates of the
Partnership. Profits and losses are allocated 83.72% to the Partnership and
16.28% to the affiliates. All assets, liabilities, income and expenses of the
joint ventures are included in the financial statements of the Partnership with
appropriate adjustment of profit or loss for the affiliates' participation in
the joint ventures.
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
compliance 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 1994 in the financial statements is $4,255,189 less 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:
Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
------------------ ------------------ ------------------
Paid Payable Paid Payable Paid Payable
--------- ------- -------- ------- -------- -------
Property manage-
ment fees $827,716 None $866,889 $104,097 $976,555 $77,127
Reimbursement of
expenses to
General Partner
at cost:
Accounting 80,957 31,333 64,215 5,310 65,890 4,813
Data processing 64,251 14,023 36,471 6,722 41,631 3,428
Investment
processing 7,068 571 10,056 831 1,711 125
Investor com-
munications 12,403 5,388 8,223 680 10,182 744
Legal 15,160 9,948 16,178 1,338 20,582 1,504
Portfolio
management 76,659 32,097 73,612 8,332 53,175 12,888
Other 25,194 4,658 15,075 1,246 19,106 1,396
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed all
of the Partnership's properties until the affiliate was sold to a third party
in November 1994.
As of December 31, 1994, the General Partner has advanced $8,108,555, including
net advances of $332,832 during 1994, to the Partnership to provide working
capital and meet other Partnership obligations. During 1994, 1993 and 1992, the
Partnership incurred interest expense of $399,006, $290,389 and $281,481,
respectively, in connection with these loans. The Partnership paid interest
expense of $378,243, $217,334 and $248,308 during 1994, 1993 and 1992,
respectively. As of December 31, 1994, interest of $160,639 was payable on
these advances. Interest was computed at the American Express Company cost of
<PAGE>
funds rate plus a spread to cover administrative expenses. As of December 31,
1994, this rate was 6.56%.
As of January 1, 1993, the Partnership had a $300,000 outstanding letter of
credit which was guaranteed by an affiliate of the General Partner. This letter
of credit was required by the lending institution of the Ridgetree II mortgage
loan. During 1993, the $300,000 guarantee was released.
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 participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program. The Partnership's
premiums to the deductible insurance program were $186,498, $126,927 and
$158,266 in 1994, 1993 and 1992, respectively.
9. Property Sales:
The Partnership sold the Ridgepoint Green and Ridgepoint Way apartment
complexes during 1994 and the Butterfield Village Apartments during 1993 in
separate all cash sales for $17,790,715 and $9,385,000, respectively. From the
proceeds of the sales, the Partnership paid $16,593,178 and $6,269,575 in full
satisfaction of the properties' first mortgage loans, respectively. The bases
of these properties totaled $13,291,495 and $5,614,119, net of accumulated
depreciation of $5,966,686 and $2,713,101, respectively. For financial
statement purposes, the Partnership recognized gains of $4,257,709 and
$3,606,825 from the sale of these properties during 1994 and 1993,
respectively. The remaining proceeds from the sales were used to repay a
portion of the loan from the General Partner.
10. Extraordinary Items:
(a) During 1994, the Ridgepoint Green and Ridgepoint Way apartment complexes
were sold. In connection with the sale, the mortgage notes which had
outstanding balances of $18,459,488, including accrued interest, were repaid
for $16,593,178. The Partnership also fully amortized the remaining $355,537 of
loan modification fees related to the 1989 modifications of these mortgage
notes. During 1993, the Ridgetree II mortgage note was refinanced. In
connection with the refinancing, the mortgage note which had an outstanding
balance of $9,578,078, including accrued interest and other fees, was repaid
for $8,343,802. These transactions resulted in extraordinary gains on
forgiveness of debt totaling $1,510,773 in 1994 and $1,234,276 in 1993 for
financial statement purposes.
(b) During 1993, title to the Rancho Mirage and Highland Ridge Apartments were
relinquished through foreclosure. The Partnership wrote off the property bases
of $19,861,720, net of accumulated depreciation of $8,478,201, mortgage loan
balances of $27,645,298, accrued and unpaid interest expense and real estate
taxes of $619,926 and security deposits of $29,182. The Partnership recognized
extraordinary gains of $8,432,686 during 1993 for financial statement purposes.
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1994
<CAPTION>
Col. A Col. B Col. C Col. D
- --------------------- -------- -------------------- ---------------------------------
Initial Cost Cost Adjustments
to Partnership Subsequent to Acquisition
-------------------- ---------------------------------
Buildings Carrying
Encum- and Im- Improve- Costs Reduction
Description brances Land provements ments (a) of Basis
- --------------------- ------- -------- ------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
La Contenta Apts., 274-
units in Tempe, AZ (d) $1,300,000 $5,875,000 None $612,142 None
Meadow Creek Apts., 250-
units in Pineville, NC (d) 550,000 6,150,000 None 905,804 $(548,116)(f)
Park Colony Apts.,
352-units in
Gwinnett County, GA (d) 1,450,000 9,000,000 $44,720 1,255,336 None
Ridgetree Apts.
(Phase II), 354-units
in Dallas, TX (d) 1,432,000 8,643,000 None 1,289,690 None
Rosehill Pointe Apts.,
498-units in
Lenaxa, KS (d) 2,350,000 15,948,000 None 1,799,487 (63,517)(f)
Seabrook Apts.,
200-units in
Orange County, FL (d) 757,000 5,465,000 None 764,278 None
Spring Creek Apts., 288-
units in Columbus, OH (d) 1,400,000 7,005,000 None 1,054,199 (856,121)(f)
Westwood Apts., 320-
units in Irving, TX (d) 2,265,000 6,914,000 None 1,261,442 (1,001,000)(g)
----------- ----------- -------- ----------- -----------
Total $11,504,000 $65,000,000 $ 44,720 $ 8,942,378 $(2,468,754)
=========== =========== ======== =========== ===========
</TABLE>
See Notes (a) through (g).
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1994
(Continued)
<CAPTION>
Col. A Col. E Col. F Col. G Col. H Col. I
- ------------------- -------------------------------- -------- -------- ------ --------------
Gross Amounts at Which Life Upon
Carried at Close of Period Which Depre-
------------------------------- ciation in
Buildings Accumulated Date Date Latest Income
and Im- Total Deprecia- of Con- Acq- Statement
Description Land provements (b)(c) tion(c) struction uired is Computed
- ------------------- ----------------------------------------------- ---------- ----- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
La Contenta Apts., 274-
units in Tempe, AZ $1,301,240 $6,485,902 $7,787,142 $ 2,797,678 1984 7/83 (e)
Meadow Creek Apts., 250-
units in Pineville, NC 509,743 6,547,945 7,057,688 2,576,785 1985 1/84 (e)
Park Colony Apts.,
352-units in
Gwinnett County, GA 1,451,544 10,298,512 11,750,056 4,241,310 1984 5/83 (e)
Ridgetree Apts.
(Phase II) 354-units
in Dallas, TX 1,432,426 9,932,264 11,364,690 4,022,094 1984 2/83 (e)
Rosehill Pointe Apts.,
498-units in
Lenexa, KS 2,343,930 17,690,040 20,033,970 6,649,112 1985 11/84 (f)
Seabrook Apts.,
200-units in
Orange County, FL 773,470 6,212,808 6,986,278 2,406,343 1985 12/83 (e)
Spring Creek Apts., 288-
units in Columbus, OH 1,262,965 7,340,113 8,603,078 2,978,143 1985 2/84 (e)
Westwood Apts., 320-
units in Irving, TX 2,001,071 7,438,371 9,439,442 3,242,114 1984 3/83 (e)
----------- ----------- ------------ -----------
Total $11,076,389 $71,945,955 $ 83,022,344 $28,913,579
=========== =========== ============ ===========
</TABLE>
See Notes (a) through (g).
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
NOTES TO SCHEDULE XI
(a) Consists of legal fees, appraisal fees, title costs, other related
professional fees and capitalized construction-period interest.
(b) The aggregate cost of land for Federal income tax purposes is $11,472,495
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $64,883,866. The total of the above-mentioned is $76,356,361.
(c)
Reconciliation of Real Estate
---------------------------------------
1994 1993 1992
------------ ------------ ------------
Balance at beginning of year $102,280,525 $138,947,666 $138,947,666
Reductions during the year:
Cost of real estate sold (19,258,181) (8,327,220)
Foreclosure of properties (28,339,921)
------------ ------------ ------------
Balance at end of year $ 83,022,344 $102,280,525 $138,947,666
============ ============ ============
Reconciliation of Accumulated Depreciation
-----------------------------------------
1994 1993 1992
------------ ------------ ------------
Balance at beginning of year $32,387,624 $40,866,069 $ 37,292,308
Depreciation expense for the
year 2,492,641 2,712,857 3,573,761
Accumulated depreciation of
real estate sold (5,966,686) (2,713,101)
Foreclosure of properties (8,478,201)
------------ ------------ ------------
Balance at end of year $28,913,579 $ 32,387,624 $ 40,866,069
============ ============ ============
(d) See description of Mortgage Notes Payable in Note 3 of Notes to Financial
Statements.
(e) Depreciation expense is computed based upon the following estimated useful
lives:
Years
-----
Buildings, building appurtenances
and land improvements 30
Furniture and fixtures 5
(f) Guaranteed income earned on properties under the terms of certain
management and guarantee agreements is recorded by the Partnership as a
reduction of the basis of the property to which the guaranteed income relates.
(g) A reduction of basis was made to write down the property to its December
31, 1988 mortgage liability balance (net of an outstanding letter of credit of
$500,000).
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 325
<SECURITIES> 0
<RECEIVABLES> 364
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1784
<PP&E> 83022
<DEPRECIATION> 28914
<TOTAL-ASSETS> 56637
<CURRENT-LIABILITIES> 9963
<BONDS> 65972
<COMMON> 0
0
0
<OTHER-SE> 18097
<TOTAL-LIABILITY-AND-EQUITY> 56637
<SALES> 0
<TOTAL-REVENUES> 21278
<CGS> 0
<TOTAL-COSTS> 9845
<OTHER-EXPENSES> 3575
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6914
<INCOME-PRETAX> 944
<INCOME-TAX> 0
<INCOME-CONTINUING> 944
<DISCONTINUED> 0
<EXTRAORDINARY> 1511
<CHANGES> 0
<NET-INCOME> 2455
<EPS-PRIMARY> 27.92
<EPS-DILUTED> 27.92
</TABLE>
