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 March 31, 1996
--------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the transition period from to
------------ ------------
Commission file number 0-13334
-------
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 36-3223939
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
BALANCE SHEETS
March 31, 1996 and December 31, 1995
(Unaudited)
ASSETS
1996 1995
-------------- --------------
Cash and cash equivalents $ 831,251 $ 419,227
Escrow deposits 928,894 1,158,746
Accounts and accrued interest receivable 395,002 189,252
Prepaid expenses 35,047 159,160
Deferred expenses, net of accumulated
amortization of $790,827 in 1996 and
$763,343 in 1995 514,428 565,727
-------------- --------------
2,704,622 2,492,112
-------------- --------------
Investment in real estate:
Land 10,302,919 11,076,389
Buildings and improvements 65,733,147 71,945,955
-------------- --------------
76,036,066 83,022,344
Less accumulated depreciation 29,003,127 31,102,341
-------------- --------------
Investment in real estate, net of
accumulated depreciation 47,032,939 51,920,003
-------------- --------------
$ 49,737,561 $ 54,412,115
============== ==============
LIABILITIES AND PARTNERS' DEFICIT
Loans payable - affiliate $ 8,035,555 $ 8,385,555
Accounts payable 108,145 141,388
Due to affiliates 204,846 126,650
Accrued liabilities, principally interest
and real estate taxes 939,030 1,078,917
Security deposits 255,518 273,669
Mortgage notes payable 59,959,751 65,239,773
-------------- --------------
Total liabilities 69,502,845 75,245,952
-------------- --------------
Affiliates' participation in joint ventures (1,213,239) (1,322,633)
-------------- --------------
Limited Partners' deficit (87,037 Interests
issued and outstanding) (17,609,516) (18,559,083)
General Partner's deficit (942,529) (952,121)
-------------- --------------
Total partners' deficit (18,552,045) (19,511,204)
-------------- --------------
$ 49,737,561 $ 54,412,115
============== ==============
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 March 31, 1996 and 1995
(Unaudited)
1996 1995
-------------- --------------
Income:
Rental and service $ 3,860,871 $ 3,890,589
Interest on short-term investments 22,347 20,216
-------------- --------------
Total income 3,883,218 3,910,805
-------------- --------------
Expenses:
Interest on mortgage notes payable 1,366,721 1,440,378
Interest on short-term loans from an
affiliate 127,718 131,712
Depreciation 526,012 547,193
Amortization of deferred expenses 51,299 44,520
Property operating 1,387,260 1,306,124
Real estate taxes 322,423 317,500
Property management fees 172,169 185,830
Administrative 102,698 131,721
-------------- --------------
Total expenses 4,056,300 4,104,978
-------------- --------------
Loss before gain on sale of property
and participation in joint ventures (173,082) (194,173)
Gain on sale of property 1,363,431
Affiliates' participation in income
from joint ventures (231,190) (10,228)
-------------- --------------
Net income (loss) $ 959,159 $ (204,401)
============== ==============
Net income (loss) allocated to
General Partner $ 9,592 $ (2,044)
============== ==============
Net income (loss) allocated to
Limited Partners $ 949,567 $ (202,357)
============== ==============
Net income (loss) per Limited
Partnership Interest (87,037
issued and outstanding) $ 10.91 $ (2.32)
============== ==============
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 quarters ended March 31, 1996 and 1995
(Unaudited)
1996 1995
-------------- --------------
Operating activities:
Net income (loss) $ 959,159 $ (204,401)
Adjustments to reconcile net income
(loss) to net cash provided by
opertating activities:
Gain on sale of property (1,363,431)
Affiliates' participation in income
from joint ventures 231,190 10,228
Depreciation of properties 526,012 547,193
Amortization of deferred expenses 51,299 44,520
Net change in:
Escrow deposits 229,852 (25,670)
Accounts and accrued
interest receivable (205,750) (96)
Prepaid expenses 124,113
Accounts payable (33,243) (39,958)
Due to affiliates 78,196 (80,069)
Accrued liabilities (139,887) (128,087)
Security deposits (18,151) (2,511)
-------------- --------------
Net cash provided by operating
activities 439,359 121,149
-------------- --------------
Investing activities:
Proceeds from sale of property 5,915,000
Costs incurred in connection with sale
of property (190,517)
--------------
Net cash provided by investing activities 5,724,483
--------------
Financing activities:
Capital contribution by joint venture
partner-affiliate 11,464
Distributions to joint venture partners-
affiliates (121,796) (13,642)
Proceeds from loans payable-affiliate 307,000
Repayment of loans payable-affiliate (350,000)
Principal payments on mortgage notes
payable (198,124) (201,811)
Repayment of mortgage note payable (5,081,898)
-------------- --------------
Net cash (used in) or provided by
financing activities (5,751,818) 103,011
-------------- --------------
Net change in cash and cash equivalents 412,024 224,160
Cash and cash equivalents at beginning
of year 419,227 325,412
-------------- --------------
Cash and cash equivalents at end of period $ 831,251 $ 549,572
============== ==============
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:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1996, and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the quarters ended March 31, 1996 and 1995, the Partnership incurred
interest expense on mortgage notes payable of $1,366,721 and $1,440,378 and
paid interest expense of $1,383,482 and $1,457,139, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1996 were:
Paid Payable
------------ ---------
Reimbursement of expenses to
the General Partner, at cost $27,094 $50,227
During the quarter ended March 31, 1996, the Partnership repaid $350,000 of the
General Partner loans. As of March 31, 1996, the Partnership had loans totaling
$8,035,555 from the General Partner with accrued interest payable on these
loans totaling $42,161. During the quarters ended March 31, 1996 and 1995, the
Partnership incurred interest expense of $127,718 and $131,712 and paid
interest expense of $173,043 and $244,127 on these loans, respectively.
Interest expense is computed at the American Express Company cost of funds rate
plus a spread to cover administrative expenses. As of March 31, 1996, this rate
was 5.850%.
4. Property Sale:
During February 1996, Seabrook Apartments, which was owned by a joint venture
consisting of the Partnership and two affiliates, was sold in a cash sale for
$5,915,000. From the proceeds of the sale, $5,081,898 was paid in full
satisfaction of the first mortgage loan, as well as a brokerage commission and
other closing costs. The basis of the property was $4,361,052, net of
accumulated depreciation of $2,625,226. For financial statement purposes, the
Partnership recognized a gain of $1,363,431 from the sale of this property, of
which $228,084 was the affiliated minority joint venture partners' shares.
Total proceeds received from the sale of this property were $642,585, of which
$103,770 was the minority joint venture partners' shares. The proceeds due to
the minority joint venture partners, along with their share of the first
quarter operations of $8,688, is included in due to affiliates in the financial
statements.
<PAGE>
5. Subsequent Event:
During April 1996, the Partnership sold the La Contenta Apartments in a cash
sale for $11,300,000. From the proceeds of the sale, $6,970,559 was paid in
full satisfaction of the first mortgage loan and closing costs of $236,400 were
paid. The basis of the property was $4,737,918, net of accumulated depreciation
of $3,049,224. The Partnership will recognize a gain of $6,325,682 in its
second quarter 1996 financial statements.
<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 eight
of these properties, including the La Contenta Apartments which was sold during
April 1996. Currently, the Partnership continues to operate the six 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 1995 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
The Partnership recognized a gain on the February 1996 sale of Seabrook
Apartments which was the primary reason for the increase in net income during
the quarter ended March 31, 1996 as compared to the same period in 1995.
Further discussion of the Partnership's operations is summarized below.
1996 Compared to 1995
- ---------------------
Discussions of fluctuations between 1996 and 1995 refer to the quarters ended
March 31, 1996 and 1995.
The Partnership sold the Seabrook Apartments in February 1996. As a result, the
Partnership recognized a gain of $1,363,431 on the sale of the property in
1996. The sale also resulted in decreases in rental and service income,
interest expense on mortgage notes payable, depreciation, property operating
expenses, real estate taxes and property management fees during 1996 as
compared to 1995.
Six of the Partnership's seven remaining properties at March 31, 1996
experienced higher rental rates in 1996 which resulted in increased rental and
service income and property management fees and partially offset the decreases
from the property sale.
Amortization expense increased slightly during 1996 as compared to 1995 due to
the full amortization of deferred expenses related to the Seabrook Apartments'
mortgage note payable in connection with the sale of the property.
<PAGE>
Roof repairs incurred at the Park Colony Apartments and increased payroll costs
incurred at certain of the Partnership's properties resulted in increased
property operating expense during 1996 as compared to 1995. This increase
offset the decrease from the property sale.
Real estate taxes increased at the Park Colony and Rosehill Pointe apartment
complexes due to higher assessed values and resulted in increased real estate
tax expense during 1996 as compared to 1995, which fully offset the decrease
from the property sale.
Due to lower accounting fees, administrative expenses decreased during 1996 as
compared to 1995.
The gain recognized in connection with the sale of Seabrook Apartments resulted
in an increase in affiliates' participation in income from joint ventures
during 1996 as compared to 1995.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership increased by approximately $412,000 as of
March 31, 1996 when compared to December 31, 1995. The Partnership received
cash totaling approximately $439,000 from its operating activities which
consisted primarily of cash flow generated from property operations partially
offset by the payment of administrative expenses and short-term interest
expense. The Partnership also received cash of approximately $5,724,000 from
its investing activities relating to the sale of Seabrook Apartments.
Approximately $5,082,000 of the proceeds from the property sale was used in the
Partnership's financing activities to repay the related mortgage note. The
Partnership also used cash to fund its other financing activities which
consisted of a $350,000 repayment of the loans from the General Partner,
principal payments on mortgage notes payable of approximately $198,000 and
distributions to joint venture partners of approximately $122,000.
The Partnership has loans of approximately $8,036,000 payable to the General
Partner at March 31, 1996 in connection with funds advanced for working capital
purposes and for property operating deficits. Approximately $3,500,000 of these
loans were repaid in April 1996 primarily from proceeds received in connection
with the sale of La Contenta Apartments. The remaining 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 remaining real
estate investments prior to any distributions to the Limited Partners from
these sources.
The General Partner may continue to make arrangements with an affiliate to
provide additional short-term loans to the Partnership to fund working capital
needs or operating deficits, although there is no assurance that such loans
will be available. 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 1996 and 1995, six of the seven remaining properties owned by
the Partnership as of March 31, 1996 generated positive cash flow and the
Ridgetree - Phase II Apartments generated a marginal cash flow deficit. In
addition, the Seabrook Apartments, which was sold in February 1996, generated a
marginal cash flow deficit during 1995 and prior to its sale in 1996. As of
March 31, 1996, occupancy rates of the Partnership's properties ranged from 92%
to 98%.
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 improving property
operating performance, and seeking rent increases where market conditions
allow.
The General Partner believes that the market for multifamily housing properties
has become increasingly favorable to sellers of these properties. During
February 1996 and April 1996, the Partnership sold the Seabrook and La Contenta
apartment complexes, respectively. Currently, the Partnership has entered into
negotiations for a contract to sell the Meadow Creek Apartments. The
Partnership has also entered into a contract to sell the Ridgetree - Phase II
and Rosehill Pointe apartment complexes for sales prices of $9,200,000 and
$20,700,000, respectively. The Partnership is preparing to market two
properties for sale and is actively marketing an additional two properties. If
current market conditions remain favorable and the General Partner can obtain
appropriate sales prices, the Partnership's liquidation strategy may be
accelerated. The General Partner, however, does not anticipate that investors
will recover a substantial portion of their original investment.
As mentioned above, during February 1996, the Partnership sold the Seabrook
Apartments, which was owned by a joint venture consisting of the Partnership
and two affiliates, in a cash sale for $5,915,000. From the proceeds,
$5,081,898 was paid in full satisfaction of the first mortgage loan. Net
proceeds received from this transaction were $642,585, of which $538,815 was
the Partnership's share. See Note 4 of Notes to Financial Statements for
additional information.
During April 1996, the Partnership sold the La Contenta Apartments in a cash
sale for $11,300,000. From the proceeds, $6,970,559 was paid in full
satisfaction of the first mortgage loan. Net proceeds received from this sale
were $4,093,041. A portion of the sale proceeds was used to repay a portion of
the General Partner loan in April 1996. See Note 5 of Notes to Financial
Statements for additional information.
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 no third-party, first mortgage financing which matures
prior to January 1998.
<PAGE>
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 and/or sales prices
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)(i) Agreement of Sale and attachment thereto relating to the sale of
Ridgetree Apartments, Phase II, previously filed as Exhibit 2(a) to the
Registrant's Current Report on Form 8-K dated April 23, 1996, is incorporated
herein by reference.
(ii) Agreement of Sale and attachment thereto relating to the sale of Rosehill
Pointe Apartments, previously filed as Exhibit 2(b) to the Registrant's Current
Report on Form 8-K dated April 23, 1996, is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the quarter ended March 31,
1996 is attached hereto.
(b) Reports on Form 8-K: A Current Report on Form 8-K dated April 22, 1996 was
filed reporting the sale of La Contenta Apartments in Tempe, Arizona and a
Current Report on Form 8-K dated April 23, 1996 was filed reporting the
contract to sell the Ridgetree - Phase II and Rosehill Pointe apartment
complexes in Dallas, Texas and Lenexa, Kansas, respectively.
<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: May 15, 1996
---------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 831
<SECURITIES> 0
<RECEIVABLES> 395
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2190
<PP&E> 76036
<DEPRECIATION> 29003
<TOTAL-ASSETS> 49738
<CURRENT-LIABILITIES> 9543
<BONDS> 59960
0
0
<COMMON> 0
<OTHER-SE> (18552)
<TOTAL-LIABILITY-AND-EQUITY> 49738
<SALES> 0
<TOTAL-REVENUES> 5015
<CGS> 0
<TOTAL-COSTS> 1882
<OTHER-EXPENSES> 680
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1494
<INCOME-PRETAX> 959
<INCOME-TAX> 0
<INCOME-CONTINUING> 959
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 959
<EPS-PRIMARY> 10.91
<EPS-DILUTED> 10.91
</TABLE>
