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, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-13334
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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.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
BALANCE SHEETS
September 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
------------- -------------
Cash and cash equivalents $ 383,871 $ 325,412
Escrow deposits 1,165,566 1,094,558
Accounts and accrued interest receivable 51,359 364,052
Prepaid expenses 271,424
Deferred expenses, net of accumulated
amortization of $718,820 in 1995
and $585,255 in 1994 610,250 743,815
------------- -------------
2,482,470 2,527,837
------------- -------------
Investment in real estate, at cost:
Land 11,076,389 11,076,389
Buildings and improvements 71,945,955 71,945,955
------------- -------------
83,022,344 83,022,344
Less accumulated depreciation 30,555,152 28,913,579
------------- -------------
Investment in real estate, net of
accumulated depreciation 52,467,192 54,108,765
------------- -------------
$ 54,949,662 $ 56,636,602
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Loans payable - affiliate $ 8,245,555 $ 8,108,555
Accounts payable 126,737 170,393
Due to affiliates 75,602 258,657
Accrued liabilities, principally interest
and real estate taxes 1,218,157 1,131,065
Security deposits 287,427 293,922
Mortgage notes payable 65,420,140 65,971,823
------------- -------------
Total liabilities 75,373,618 75,934,415
Affiliates' participation in joint ventures (1,259,560) (1,201,168)
Partners' deficit (87,037 Limited Partnership
Interests issued and outstanding) (19,164,396) (18,096,645)
------------- -------------
$ 54,949,662 $ 56,636,602
============= =============
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 INCOME AND EXPENSES
for the nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
------------- -------------
Income:
Rental and service $ 11,644,900 $ 13,264,620
Interest on short-term investments 46,559 24,618
------------- -------------
Total income 11,691,459 13,289,238
------------- -------------
Expenses:
Interest on mortgage notes payable 4,323,944 5,079,007
Interest on short-term loans 412,519 276,264
Depreciation 1,641,573 1,945,451
Amortization of deferred expenses 133,565 161,364
Property operating 4,357,337 5,720,111
Real estate taxes 929,676 1,272,280
Property management fees 573,516 662,276
Administrative 414,526 566,428
------------- -------------
Total expenses 12,786,656 15,683,181
------------- -------------
Loss before gain on sale of properties,
participations in joint ventures and
extraordinary item (1,095,197) (2,393,943)
Gain on sale of properties 4,257,709
Affiliates' participation in losses
from joint ventures 27,446 44,860
------------- -------------
(Loss) income before extraordinary item (1,067,751) 1,908,626
Extraordinary item:
Gain on forgiveness of debt 1,510,773
------------- ------------
Net (loss) income $ (1,067,751) $ 3,419,399
============= =============
(Loss) income before extraordinary item
allocated to General Partner $ (10,678) $ 19,087
============= =============
(Loss) income before extraordinary item
allocated to Limited Partners $ (1,057,073) $ 1,889,539
============= =============
(Loss) income before extraordinary item
per Limited Partnership Interest
(87,037 issued and outstanding) $ (12.15) $ 21.71
============= =============
Extraordinary item allocated to General
Partner None $ 15,107
============= =============
Extraordinary item allocated to Limited
Partners None $ 1,495,666<PAGE>
============= =============
Extraordinary item per Limited Partnership
Interest (87,037 issued and outstanding) None $ 17.18
============= =============
Net (loss) income allocated to General
Partner $ (10,678) $ 34,194
============= =============
Net (loss) income allocated to Limited
Partner $ (1,057,073) $ 3,385,205
============= =============
Net (loss) income per Limited Partnership
Interest (87,037 issued and outstanding) $ (12.15) $ 38.89
============= =============
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 INCOME AND EXPENSES
for the quarters ended September 30, 1995 and 1994
(Unaudited)
1995 1994
------------- -------------
Income:
Rental and service $ 3,912,867 $ 4,274,912
Interest on short-term investments 12,954 9,039
------------- -------------
Total income 3,925,821 4,283,951
------------- -------------
Expenses:
Interest on mortgage notes payable 1,442,945 1,666,941
Interest on short-term loans 141,519 107,572
Depreciation 547,190 623,160
Amortization of deferred expenses 44,520 49,879
Property operating 1,660,259 2,123,212
Real estate taxes 318,711 388,634
Property management fees 197,093 215,324
Administrative 142,453 189,008
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Total expenses 4,494,690 5,363,730
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Loss before gain on sale of properties,
participations in joint ventures and
extraordinary item (568,869) (1,079,779)
Gain on sale of properties 4,257,709
Affiliates' participation in losses
from joint ventures 36,992 44,891
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(Loss) income before extraordinary item (531,877) 3,222,821
Extraordinary item:
Gain on forgiveness of debt 2,602,346
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Net (loss) income $ (531,877) $ 5,825,167
============= =============
(Loss) income before extraordinary item
allocated to General Partner $ (5,319) $ 32,229
============= =============
(Loss) income before extraordinary item
allocated to Limited Partners $ (526,558) $ 3,190,592
============= =============
(Loss) income before extraordinary item
per Limited Partnership Interest
(87,037 issued and outstanding) $ (6.05) $ 36.66
============= =============
Extraordinary item allocated to General
Partner None $ 26,023
============= =============
Extraordinary item allocated to Limited
Partners None $ 2,576,323<PAGE>
============= =============
Extraordinary item per Limited Partnership
Interest (87,037 issued and outstanding) None $ 29.59
============= =============
Net (loss) income allocated to General
Partner $ (5,319) $ 58,252
============= =============
Net (loss) income allocated to Limited
Partners $ (526,558) $ 5,766,915
============= =============
Net (loss) income per Limited Partnership
Interest (87,037 issued and outstanding) $ (6.05) $ 66.25
============= =============
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 CASH FLOWS
for the nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
------------- -------------
Operating activities:
Net (loss) income $ (1,067,751) $ 3,419,399
Adjustments to reconcile net (loss)
income to net cash provided by or
(used in) operating activities:
Gain on forgiveness of debt (1,510,773)
Gain on sale of properties (4,257,709)
Affiliates' participation in losses
from joint ventures (27,446) (44,860)
Depreciation of properties 1,641,573 1,945,451
Amortization of deferred expenses 133,565 161,364
Net change in:
Escrow deposits (71,008) (5,609)
Accounts and accrued interest
receivable 312,693 (275,319)
Prepaid expenses (271,424)
Accounts payable (43,656) (47,741)
Due to affiliates (183,055) (51,004)
Accrued liabilities 87,092 (552,854)
Security deposits (6,495) (71,340)
------------- -------------
Net cash provided by or (used in)
operating activities 504,088 (1,290,995)
------------- -------------
Investing activities:
Proceeds from sale of properties 17,790,715
Costs incurred in connection with sale of
properties (241,511)
-------------
Net cash provided by investing activities 17,549,204
-------------
Financing activities:
Capital contributions by joint venture
partners - affiliates 25,323
Distributions to joint venture
partners - affiliates (56,269) (83,452)
Proceeds from loans payable - affiliate 537,000 671,456
Repayment of loans payable - affiliate (400,000) (534,073)
Proceeds from issuance of mortgage notes
payable 7,448,362
Principal payments on mortgage notes
payable (551,683) (421,069)
Repayments of mortgage notes payable (23,693,178)
Payment of deferred expenses (245,985)<PAGE>
------------- -------------
Net cash used in financing activities (445,629) (16,857,939)
------------- -------------
Net change in cash and cash equivalents 58,459 (599,730)
Cash and cash equivalents at beginning
of year 325,412 1,160,704
------------- -------------
Cash and cash equivalents at end of period $ 383,871 $ 560,974
============= =============
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 Policy:
Several reclassifications have been made to the previously reported 1994
statements in order to provide comparability with the 1995 statements. These
reclassifications have not changed the 1994 results. 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,
1995, and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1995 and 1994, the Partnership
incurred interest expense on mortgage notes payable of $4,323,944 and
$5,079,007 and paid interest expense of $4,374,226 and $5,413,075,
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, 1995 were:
Paid
-----------------------
Nine Months Quarter Payable
------------ --------- -----------
Reimbursement of expenses to
the General Partner, at cost $205,971 $23,366 $29,506
As of September 30, 1995, the General Partner has advanced $8,245,555,
including net advances of $137,000 during 1995, to the Partnership to provide
working capital and meet other Partnership obligations. During the nine months
ended September 30, 1995 and 1994, the Partnership incurred interest expense in
connection with these loans of $412,519 and $276,264, respectively. The
Partnership paid interest expense of $527,062 and $378,243 during the nine
months ended September 30, 1995 and 1994, respectively. As of September 30,
1995, interest of $46,096 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, 1995, this rate was 6.307%.
<PAGE>
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. The Partnership has since disposed of six
of these properties. As of September 30, 1995, 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 1994 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
The Ridgepoint Green and Ridgepoint Way apartment complexes, which were
generating losses for financial statement purposes, were sold in August 1994.
The Partnership recognized gains from these sales, as well as an extraordinary
gain on forgiveness of debt relating to the repayment of the related mortgage
notes. The combined effect of these events resulted in the Partnership
recognizing net income during the nine months and quarter ended September 30,
1994 as compared to a net loss during the same periods in 1995.
1995 Compared to 1994
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1995 and 1994 refer
both to the nine months and quarters ended September 30, 1995 and 1994.
As mentioned above, the Partnership sold 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
mortgage notes payable, depreciation, amortization, property operating expense,
real estate taxes and property management fees during 1995 as compared to 1994.
Increased occupancy and/or rental rates at six of the Partnership's eight
remaining properties during 1995 partially offset the decrease in rental and
service income, and consequently, property management fees.
As a result of higher average interest rates earned on short-term investments,
interest income on short-term investments increased during 1995 as compared to
1994.
Due to higher average short-term loan balances payable to an affiliate and
higher average interest rates in 1995, interest expense on short-term loans
increased during 1995 as compared to 1994.
<PAGE>
Property operating expenses decreased in 1995 as compared to 1994 primarily due
to the 1994 property sales discussed above. Also contributing to the decrease
was maintenance and repair expense incurred during 1994, which included
exterior painting, wood siding replacement and the replacement of floor
coverings at the Meadow Creek and Seabrook apartment complexes.
Legal and professional fees were incurred in 1994 in connection with the
reorganization proceedings related to the Ridgepoint Green and Ridgepoint Way
apartment complexes prior to their sale. This was the primary reason for the
decrease in administrative expense during 1995 as compared to 1994. Lower data
processing costs and portfolio management fees in 1995 also contributed to the
decrease.
During August 1994, the Partnership recognized a gain of $4,257,709 on the sale
of the Ridgepoint Green and Ridgepoint Way apartment complexes.
During 1995, interest expense on mortgage notes payable and amortization
expense decreased at the Rosehill Pointe Apartments and resulted in a decrease
in the affiliates' participation in losses from joint ventures during 1995 as
compared to 1994.
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
Green and Ridgepoint Way apartment complexes. This gain is net of the debt
restructuring expense and full amortization of deferred expenses recognized by
the Partnership during the first and second quarters of 1994 in connection with
the approved plans of reorganization related to the Ridgepoint Green and
Ridgepoint Way mortgage notes. The debt restructuring expense was subsequently
forgiven in connection with the sale.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased slightly as of September 30,
1995 when compared to December 31, 1994.
The Partnership has loans of approximately $8,246,000 payable to the General
Partner at September 30, 1995 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.
<PAGE>
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 1995, five of the Partnership's eight remaining properties
generated positive cash flow and three generated marginal cash flow deficits.
During 1994, six of these properties generated positive cash flow and two
generated marginal cash flow deficits. The Spring Creek Apartments, which had
generated positive cash flow during 1994, generated a marginal cash flow
deficit during 1995 as a result of lower rental income, higher property
operating expense and increased debt service payments due to the 1994
refinancing of its loan at an increased principal balance. In addition, the
Ridgepoint Green and Ridgepoint Way apartment complexes generated significant
cash flow deficits prior to the sale of the properties in August 1994.
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 September 30, 1995, the occupancy rates of
the Partnership's properties ranged from 90% to 97%. Despite improvements
during 1994 and 1995 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 refinance certain of the existing loans with new lenders,
the Partnership has only one loan, a mortgage loan of approximately $6,933,000
collateralized by the La Contenta Apartments, which matures in 1996. The
General Partner is considering the sale of the property prior to the maturity
of the loan.
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.
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
PART II - OTHER INFORMATION
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.
(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
reference.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended September 30, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR 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/Brian D. Parker
---------------------------------
Brian D. Parker
Senior Vice President, and Chief
Financial Officer (Principal Accounting and
Financial Officer) of Balcor Partners-84 II,
Inc., the General Partner
Date: November 14, 1995
---------------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 384
<SECURITIES> 0
<RECEIVABLES> 51
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1872
<PP&E> 83022
<DEPRECIATION> 30555
<TOTAL-ASSETS> 54950
<CURRENT-LIABILITIES> 9953
<BONDS> 65420
<COMMON> 0
0
0
<OTHER-SE> (19164)
<TOTAL-LIABILITY-AND-EQUITY> 54950
<SALES> 0
<TOTAL-REVENUES> 11691
<CGS> 0
<TOTAL-COSTS> 5833
<OTHER-EXPENSES> 2190
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4736
<INCOME-PRETAX> (1068)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1068)
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<NET-INCOME> (1068)
<EPS-PRIMARY> (12.15)
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