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, 1996
-----------------
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
------------- -------------
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 Rd.
Bannockburn, IL 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
---------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
- -----------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
- ----------------
Balcor Realty Investors 84-Series II, A Real Estate Limited Partnership (the
"Registrant") is a limited partnership formed in 1983 and 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 twelve of these
properties. As of December 31, 1996, the Registrant owned the two properties
described under "Item 2. Properties." The Partnership Agreement provides that
the proceeds of any sale or refinancing of the Registrant's properties will not
be reinvested in new acquisitions.
The Registrant's properties are subject to certain competitive conditions in
the markets in which they are located. See "Item 7. Liquidity and Capital
Resources" for additional information.
Real estate values, especially good quality, well located property, increased
significantly during 1996 due to a combination of readily available capital,
low interest rates, and decreased vacancy rates resulting from steady demand
and an acceptable level of new construction. While 1996 proved to be an
excellent year to sell real estate, projected yields by buyers on new
acquisitions have declined significantly due to competition and rising prices.
Although there will be variances by asset class and geographic area, the
investment climate is expected to remain strong for 1997. However, values could
begin to level off as they approach replacement cost, triggering new
construction and an increase in capitalization rates.
The investment market for apartments was excellent during 1996 due to a number
of factors. Investor interest was strong, driven primarily by institutions, as
Real Estate Investment Trusts aggressively expanded their portfolios and
pension funds viewed apartments as an attractive asset class due to their
perceived low volatility and the emergence of large professional management
companies. Operationally, existing apartment properties registered on a
national basis occupancy in the mid 90's and rental rate increases of 3-4% in
1996. While above the rate of inflation, the rate of rental growth in 1996 was
below that of the previous two years suggesting that the apartment cycle may
have plateaued, especially as the impact of new construction in many areas is
being felt. While 1997 is projected to be another solid year, values should
begin to level off as capitalization rates move upward continuing a trend which
began during the second half of 1996.
During 1996, the Registrant sold six properties in all cash sales for a total
of $67,215,000. In addition, the Registrant is actively marketing its remaining
two properties for sale. See "Item 7. Liquidity and Capital Resources" for
additional information. The timing of the termination of the Registrant and
<PAGE>
final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. The Registrant retained
a portion of the cash to satisfy obligations of the Registrant as well as
establish a reserve for contingencies. Such contingencies may include legal and
other fees stemming from litigation involving the Registrant including, but not
limited to the lawsuits discussed in "Item 3. Legal Proceedings." In the
absence of any contingency, the reserves will be paid within twelve months of
the last property being sold. In the event a contingency continues to exist or
arises, reserves may be held by the Registrant for a longer period of time.
Activity for the purchase of limited partnership interests ("tender offers")
has increased in real estate limited partnerships generally. Many of these
tender offers have been made by investors seeking to make a profit from the
purchase of the interests. In the event a tender offer is made for interests in
the Registrant, the General Partner will issue a response to Limited Partners
expressing the General Partner's opinion regarding the offer. Certain
administrative costs will be incurred to respond to a tender offer. The General
Partner cannot predict with any certainty what impact a tender offer will have
on the operations or management of the Registrant.
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.
Other Information
- -----------------
Westwood Village Apartments
- ---------------------------
As previously reported, on September 4, 1996, the Registrant contracted to sell
Westwood Village Apartments, to an unaffiliated party, Alliance Holdings,
L.L.C., an Illinois limited liability company, for a sale price of $9,000,000.
The purchaser assigned its rights under the agreement of sale to one of its
affiliates, Affiliate OG Portfolio L.P., and the sale closed on November 14,
1996. From the proceeds of the sale, the Registrant repaid the outstanding
balances of the first and second mortgage loans of $6,792,853 and $150,996,
respectively, and paid $180,000 to an unaffiliated party as a brokerage
commission, $90,000 to an affiliate of the third party providing property
management services for the property as a fee for services rendered in
connection with the sale of the property and $36,095 in closing costs. The
Registrant received the remaining proceeds of approximately $1,750,000.
<PAGE>
Item 2. Properties
- ------------------
As of December 31, 1996, the Registrant owns the two properties described
below, both of which are owned in fee simple:
Location Description of Property
- -------- -----------------------
Gwinnett County, Georgia Park Colony Apartments: a 352-unit apartment
complex located on approximately 29 acres.
Columbus, Ohio Spring Creek Apartments: a 288-unit apartment
complex located on approximately 19 acres.
Each of the above properties is held subject to various mortgage loans and
other forms of financing, as described in more detail in Note 5 of Notes to
Financial Statements.
The average occupancy rates and effective average rent per unit for each of the
last five years for the two properties owned by the Registrant at December 31,
1996, are described below:
1996 1995 1994 1993 1992
------------ ----------- ---------- ----------- -----------
Park Colony
Occupancy rate 96% 97% 96% 97% 98%
Effective rent $631 $618 $586 $540 $497
Spring Creek
Occupancy rate 97% 93% 96% 96% 97%
Effective rent $539 $500 $510 $517 $493
Apartment units in the above properties are rented with leases of one year or
less, with no tenant occupying greater than ten percent of the property. Real
estate taxes incurred in 1996 for the above properties totaled $330,482.
The Federal tax basis of the Registrant's properties totaled $18,846,756 as of
December 31, 1996. For Federal income tax purposes, the acquisition costs of
the properties are depreciated over useful lives of 15 years, using the ACRS
method. Other minor assets are depreciated over their applicable recovery
periods.
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.
<PAGE>
Item 3. Legal Proceedings
- -------------------------
Proposed Class Action
- ---------------------
On February 29, 1996, a proposed class action complaint was filed, Raymond
Masri vs. Lehman Brothers, Inc., et al., Case No. 96/103727 (Supreme Court of
the State of New York, County of New York). The Registrant, additional limited
partnerships which were sponsored by The Balcor Company, three limited
partnerships sponsored by the predecessor of Lehman Brothers, Inc. (together
with the Registrant and the affiliated partnerships, the "Defendant
Partnerships"), Lehman Brothers, Inc. and Smith Barney Holdings, Inc. are
defendants. The complaint alleges, among other things, common law fraud and
deceit, negligent misrepresentation and breach of fiduciary duty relating to
the disclosure of information in the offering of limited partnership interests
in the Defendant Partnerships. The complaint seeks judgment for compensatory
damages equal to the amount invested in the Defendant Partnerships by the
proposed class plus interest accrued thereon; general damages for injuries
arising from the defendants' alleged actions; recovery from the defendants of
all profits received by them as a result of their alleged actions relating to
the Defendant Partnerships; exemplary damages; attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Registrant believes it has meritorious defenses
to contest the claims. It is not determinable at this time whether or not an
unfavorable decision in this action would have a material adverse impact on the
Registrant.
Proposed Class Action
- ---------------------
On August 30, 1996, a proposed class action complaint was filed, Lenore Klein
vs. Lehman Brothers, Inc., et al., Superior Court of New Jersey, Law Division,
Union County, Docket No. Unn-L-5162-96). The Registrant, additional limited
partnerships which were sponsored by The Balcor Company (together with the
Partnership, the "Affiliated Partnerships"), American Express Company, Lehman
Brothers, Inc., additional limited partnerships sponsored by the predecessor of
Lehman Brothers, Inc. (together with the Registrant and the Affiliated
Partnerships, the "Defendant Partnerships") and Smith Barney Holdings, Inc. are
the named defendants in the action. The complaint was amended on October 18,
1996 to add additional plaintiffs. The amended complaint alleges, among other
things, common law fraud and deceit, negligent misrepresentation, breach of
contract, breach of fiduciary duty and violation of certain New Jersey statutes
relating to the disclosure of information in the offering of limited
partnership interests in the Defendant Partnerships. The amended complaint
seeks judgment for compensatory damages equal to the amount invested in the
Defendant Partnerships by the proposed class plus interest; general damages for
injuries arising from the defendants' alleged actions; equitable relief,
including rescission, on certain counts; punitive damages; treble damages on
certain counts; recovery from the defendants of all profits received by them as
a result of their alleged actions relating to the Defendant Partnerships;
attorneys' fees and other costs.
<PAGE>
The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Registrant believes it has meritorious defenses
to contest the claims. It is not determinable at this time whether or not an
unfavorable decision in this action would have a material adverse impact on the
Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1996.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- -------------------------------------------------------------------------
Matters
- -------
There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop. For information
regarding distributions, see "Item 7. Management's Discussion and Analysis of
Financial Conditions and Results of Operations - Liquidity and Capital
Resources."
As of December 31, 1996, the number of record holders of Limited Partnership
Interests of the Registrant was 8,444.
Item 6. Selected Financial Data
- -------------------------------
Year ended December 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ----------- ---------- ----------- -----------
Total income $9,561,969 $15,677,369 $17,020,543 $17,984,872 $21,928,782
Loss before
gains on sales
of assets and
extraordinary
items (4,663,565) (1,414,559) (3,313,544) (3,371,970) (5,099,275)
Net income (loss) 22,488,661 (1,414,559) 2,454,938 9,901,817 (5,099,275)
Net income (loss)
per Limited Part-
nership Interest 255.80 (16.09) 27.92 112.63 (58.00)
Total assets 15,614,734 54,412,115 56,636,602 73,333,165 100,416,387
Mortgage notes
payable 17,211,741 65,239,773 65,971,823 84,130,907 120,086,011
Distributions per
Limited Partner-
ship Interest (A) 58.00 None None None None
(A) This amount represents a distribution of original capital of $58.00 per
Limited Partnership Interest.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
- ---------------------
Operations
- ----------
Summary of Operations
- ---------------------
Balcor Realty Investors 84 - Series II, A Real Estate Limited Partnership (the
"Partnership") sold six properties during 1996. As a result of the gains
recognized on these sales, the Partnership generated net income during 1996 as
compared to a net loss during 1995. During 1994, the Partnership sold two
properties and recognized an extraordinary gain on forgiveness of debt relating
to the repayment of the mortgage notes in connection with the sales. The gains
related to these events resulted in the Partnership recognizing net income
during 1994 as compared to a net loss during 1995. Further discussion of the
Partnership's operations are summarized below.
1996 Compared to 1995
- ---------------------
The Partnership sold the La Contenta, Meadow Creek, Ridgetree - Phase II,
Rosehill Pointe, Seabrook and Westwood Village apartment complexes during 1996.
As a result, rental and service income decreased by approximately $6,480,000
during 1996 as compared to 1995. This decrease was partially offset by
increases of approximately $298,000 in rental and service income due to
increased rental rates at the Partnership's two remaining properties.
Proceeds received in connection with the property sales were invested in
short-term investments prior to their distribution to Limited Partners in July
and October 1996. As a result, interest income on short-term investments
increased during 1996 as compared to 1995.
As a result of the six sales in 1996, interest expense on mortgage notes
payable decreased during 1996 as compared to 1995.
Due to the repayment in full of the short-term loan from an affiliate during
June 1996 with proceeds from the sales of the Seabrook, La Contenta and Meadow
Creek apartment complexes, interest expense on short-term loans from an
affiliate decreased during 1996 as compared to 1995.
Depreciation expense decreased during 1996 as compared to 1995 due to the 1996
property sales.
Amortization expense decreased during 1996 as compared to 1995 due to the 1996
property sales.
As a result of the 1996 property sales, property operating expense decreased by
approximately $1,913,000 during 1996 as compared to 1995. This decrease was
partially offset by an increase of approximately $277,000 related to painting
and structural repairs at Westwood Village Apartments, prior to its sale in
November 1996.
<PAGE>
Real estate tax expense decreased during 1996 as compared to 1995 due to the
1996 property sales.
Property management fees decreased during 1996 compared to 1995 due to the
property sales during 1996.
Administrative expense increased during 1996 as compared to 1995 primarily due
to higher consulting fees of approximately $122,000. This increase was
partially offset by lower legal fees of approximately $54,000.
For financial statement purposes, the Partnership recognized gains of
$27,237,296 during 1996 in connection with the six property sales.
The gains recognized in connection with the sales of the Rosehill Pointe and
Seabrook apartment complexes resulted in the recognition of affiliates'
participation in income from joint ventures during 1996 as compared to
affiliates' participation in loss from joint ventures during 1995.
As a result of the sale of the Westwood Village Apartments, the Partnership
recognized an extraordinary gain on forgiveness of debt of $182,585.
In connection with the sales during 1996, the Partnership wrote off the
remaining unamortized deferred financing fees in the amount of $232,868. In
addition, the Partnership paid prepayment penalties relating to the La Contenta
and Meadow Creek apartment complexes mortgage loan repayments of $171,661.
Together, these amounts were recognized as an extraordinary item and classified
as debt extinguishment expense of $404,529, of which $20,945 represents the
Rosehill Pointe Apartments affiliate's share.
1995 Compared to 1994
- ---------------------
The Partnership sold the Ridgepoint Green and Ridgepoint Way apartment
complexes in August 1994 which resulted in a decrease in rental and service
income of approximately $2,199,000 during 1995 as compared to 1994. Increased
rental and service income at seven of the Partnership's eight remaining
properties during 1995 partially offset the decrease in rental and service
income by approximately $895,000.
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.
As a result of the two property sales during 1994, interest on mortgage notes
payable decreased 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
from an affiliate increased during 1995 as compared to 1994.
Depreciation expense decreased during 1995 as compared to 1994 due to the sales
of the Ridgepoint Green and Ridgepoint Way apartment complexes.
<PAGE>
Amortization expense decreased during 1995 compared to 1994 primarily due to
the sales during 1994.
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 the high level of 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.
Real estate tax expense decreased during 1995 when compared to 1994 due to the
1994 property sales.
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, portfolio management and accounting fees in 1995 also
contributed to the decrease.
During 1994, the Partnership recognized a gain of $4,257,709 on the sale of the
Ridgepoint Green and Ridgepoint Way apartment complexes.
During 1995, rental and service income increased at the Rosehill Pointe
Apartments due to increased rental rates and higher average occupancy 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 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 as of December 31, 1996, increased by
approximately $1,607,000 when compared to December 31, 1995. The Partnership
used cash of approximately $826,000 to fund its operating activities. The
revenue generated by the Partnership's properties was offset by the payment of
administrative expenses, short-term interest expense, loan prepayment penalties
and expenditures relating to damage caused by a hail storm at the Westwood
Village Apartments and fire damage incurred at the Spring Creek Apartments. The
Partnership expects to be reimbursed by its insurance carrier for the cost of
the damage to these properties, less deductibles. The Partnership received cash
of approximately $65,839,000 from its investing activities relating to proceeds
received, net of closing costs, from the sales of the La Contenta, Meadow
Creek, Ridgetree - Phase II, Rosehill Pointe, Seabrook and Westwood Village
apartment complexes. The Partnership used cash to fund its financing activities
<PAGE>
which consisted of the payment of distributions totaling approximately
$5,048,000 to the Limited Partners, the repayment of the $8,385,555 loan from
the General Partner, the repayment of mortgage notes payable of approximately
$47,408,000, principal payments on mortgage notes payable of approximately
$620,000 and distributions to joint venture partners of approximately
$1,945,000. The Partnership made a special distribution to the Limited Partners
in January 1997 from the proceeds received in connection with the Westwood
Village Apartments sale.
In 1996, the Partnership repaid the General Partner loan, which had an
outstanding balance of $8,385,555 at December 31, 1995, primarily with proceeds
from the sale of the La Contenta, Meadow Creek, and Seabrook apartment
complexes.
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, the Partnership's two remaining properties
generated positive cash flow. The La Contenta, Ridgetree - Phase II and
Westwood Village apartment complexes, which were sold in April, June and
November 1996, respectively, generated positive cash flow during 1995, and
marginal cash flow deficits prior to their sales in 1996. In addition, the
Meadow Creek and Rosehill Pointe apartment complexes, which were sold in May
and June 1996, respectively, generated positive cash flow in 1995 and prior to
their sales in 1996. 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 December 31, 1996, the occupancy rates of Park Colony and Spring
Creek apartment complexes were 97% and 96%, respectively.
Park Colony Apartments is located in Norcross, Georgia, a northeast (Gwinnett
County) suburb of Atlanta. Norcross has a diverse apartment market, catering to
a wide range of apartment dwellers. Park Colony Apartments falls in the middle
of this range. Average occupancy in 1996 was 96%; sub-market occupancy for
similar product type was 95%. Approximately 25,000 new multi-family units were
added to Atlanta's apartment inventory during 1995 and 1996. While this heavy
supply of new product is being absorbed by apartment dwellers due to Atlanta's
continued rapid growth in population and employment, growth in rental rates has
slowed significantly.
Spring Creek Apartments is located in Columbus, Ohio, in the northeast
sub-market. This area has a diverse apartment market, catering to a wide range
of apartment dwellers. Spring Creek Apartments' pricing positions it toward the
upper end of the market, falling below new construction only. Approximately 800
new units were completed in the vicinity of Spring Creek Apartments in 1996.
The new multi-family construction has not had a negative impact on Spring Creek
Apartments' occupancy or rental rates. In 1996, the property's average
occupancy was 97%; the northeast sub-market's occupancy was 94%.
<PAGE>
During 1996, the Partnership sold the La Contenta, Meadow Creek, Ridgetree -
Phase II, Rosehill Pointe, Seabrook and Westwood Village apartment complexes.
Additionally, the Partnership is actively marketing the two remaining
properties for sale. The Partnership expects to sell the remaining two
properties during 1997. The timing of the termination of the Partnership and
final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. The Partnership has
retained a portion of the cash to satisfy obligations of the Partnership as
well as establish a reserve for contingencies. Such contingencies may include
legal and other fees stemming from litigation involving the Partnership
including, but not limited to, the lawsuits discussed in "Item 3. Legal
Proceedings." In the absence of any such contingency, the reserves will be paid
within twelve months of the last property being sold. In the event a
contingency exists, reserves may be held by the Partnership for a longer period
of time.
The Seabrook Apartments was owned by a joint venture consisting of the
Partnership and two affiliates. In February 1996, the joint venture sold the
property in an all cash sale for $5,915,000. From the proceeds of the sale, the
joint venture paid $5,081,898 to the third party mortgage holder in full
satisfaction of the first mortgage loan, and paid $190,517 in selling costs.
The net proceeds of the sale were $642,585, of which $538,815 was the
Partnership's share. Pursuant to the terms of the sale, the joint venture was
required to retain $250,000 of the proceeds until August 1996. The full amount
of the holdback was released in August 1996. The proceeds received by the
Partnership were used to repay a portion of the General Partner loan. See Note
11 of Notes to Financial Statements for additional information.
In April 1996, the Partnership sold the La Contenta Apartments in an all cash
sale for $11,300,000. From the proceeds of the sale, the Partnership paid
$6,970,559 to the third party mortgage holder in full satisfaction of the first
mortgage loan, paid $236,400 in selling costs and paid $69,765 of prepayment
penalties. The remainder of the proceeds were used to repay a portion of the
General Partner loan. See Note 11 of Notes to Financial Statements for
additional information.
In May 1996, the Partnership sold the Meadow Creek Apartments in an all cash
sale for $11,100,000. From the proceeds of the sale, the Partnership paid
$5,076,321 to the third party mortgage holder in full satisfaction of the first
mortgage loan, paid $365,650 in selling costs and paid $101,896 of prepayment
penalties. The remainder of the proceeds were used to repay the remaining
balance of the General Partner loan and to make a special distribution to the
Limited Partners in July 1996. See Note 11 of Notes to Financial Statements for
additional information.
In June 1996, the Partnership sold the Ridgetree Apartments - Phase II in an
all cash sale for $9,200,000. From the proceeds of the sale, the Partnership
paid $7,798,124 to the third party mortgage holder in full satisfaction of the
first and second mortgage loans, and paid $107,000 in selling costs. Pursuant
to the terms of the sale, the Partnership was required to retain $500,000 of
the proceeds until October 1996. The full amount of the holdback was released
in October 1996. The remainder of the proceeds were distributed as special
distributions to the Limited Partners in July and October 1996. See Note 11 of
Notes to Financial Statements for additional information.
<PAGE>
The Rosehill Pointe Apartments was owned by a joint venture consisting of the
Partnership and an affiliate. In June 1996, the joint venture sold the property
in an all cash sale for $20,700,000. From the proceeds of the sale, the joint
venture paid $15,537,677 to the third party mortgage holders in full
satisfaction of the first and second mortgage loans, and paid $170,250 in
selling costs. The net proceeds of the sale were $4,992,073, of which
$3,076,115 was the Partnership's share. Pursuant to the terms of the sale, the
joint venture was required to retain $500,000 of the proceeds until October
1996. The full amount of the holdback was released in October 1996. The
remaining proceeds received by the Partnership were distributed as special
distributions to the Limited Partners in July and October 1996. See Note 11 of
Notes to Financial Statements for additional information.
In November 1996, the Partnership sold the Westwood Village Apartments in an
all cash sale for $9,000,000. From the proceeds of the sale, the Partnership
repaid the outstanding balances of the first and second mortgage loans of
$6,792,853 and $150,996, respectively, and paid $306,095 in selling costs. A
portion of the available proceeds received by the Partnership were distributed
as a special distribution to the Limited Partners in January 1997, while the
remainder has been retained for working capital purposes. See Note 11 of Notes
to Financial Statements for additional information.
Both of the Partnership's two remaining properties are 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 1999.
In January 1997, the Partnership paid $870,370 ($10 per Interest) to Limited
Partners representing a special distribution comprised primarily of Net Cash
Proceeds received in connection with the sale of the Westwood Village
Apartments. The Partnership commenced distributions in July of 1996. The
General Partner made two distributions totaling $58 per Interest during 1996
from Net Cash Proceeds. Including the January 1997 distribution, Limited
Partners have received distributions of Net Cash Proceeds totaling $68 per
$1,000 Interest, as well as certain tax benefits. The Partnership expects to
make distributions from available proceeds received from the remaining two
properties being marketed for sale, although there can be no assurance in this
regard. In light of results to date, the General Partner does not anticipate
that investors will recover a substantial portion of their original investment.
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.
Certain statements in this Form 10-K constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
<PAGE>
statements may include projections of revenues, income or losses, capital
expenditures, plans for future operations, financing plans or requirements, and
plans relating to properties of the Partnership, as well as assumptions
relating to the foregoing.
The forward-looking statements made by the Partnership are subject to known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to differ materially
from any future results, performance or achievements expressed or implied by
the forward-looking statements.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
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, 1996 December 31, 1995
------------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
---------- --------- ---------- ---------
Total assets $15,614,734 $19,655,348 $54,412,115 $38,289,522
Partners' capital
(deficit) accounts:
General Partner (727,234) (7,112,470) (952,121) (11,388,533)
Limited Partners (1,343,455) 4,278,421 (18,559,083) (20,172,629)
Net income (loss):
General Partner 224,887 4,276,063 (14,146) (205,356)
Limited Partners 22,263,774 29,499,196 (1,400,413) (2,020,683)
Per Limited Part-
nership Interest 255.80 338.93 (16.09) (23.22)
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
(a) 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 E. Meador and James E. Mendelson. 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 (the
"Act") 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.
(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
Senior Vice President Alexander J. Darragh
Senior Vice President James E. Mendelson
Senior Vice President John K. Powell, Jr.
Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 49) 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. He is also Senior
Vice President of American Express Company and is responsible for its real
estate operations worldwide. Prior to joining Balcor, Mr. Meador was employed
at the Harris Trust and Savings Bank in the commercial real estate division
where he was involved in various lending activities. Mr. Meador received his
M.B.A. degree from the Indiana University Graduate School of Business.
Alexander J. Darragh (age 42) joined Balcor in September 1988 and is
responsible for due diligence analysis and real estate advisory services for
Balcor and American Express Company. He also has supervisory responsibility for
Balcor's environmental matters. Mr. Darragh received masters' degrees in Urban
Geography from Queen's University and in Urban Planning from Northwestern
University.
<PAGE>
James E. Mendelson (age 34) joined Balcor in July 1984 and is responsible for
Balcor's property sales activities. He also has supervisory responsibility for
Balcor's accounting, financial, treasury, investor services and investment
administration functions. From 1989 to 1995, Mr. Mendelson was Vice President -
Transaction Management and Vice President - Senior Transaction Manager and had
responsibility for various asset management matters relating to real estate
investments made by Balcor, including negotiations for the restructuring of
mortgage loan investments. Mr. Mendelson received his M.B.A. degree from the
University of Chicago.
John K. Powell, Jr. (age 46) joined Balcor in September 1985 and is responsible
for portfolio and asset management matters relating to Balcor's partnerships.
Mr. Powell also has supervisory responsibility for Balcor's risk management
function. He received a Master of Planning degree from the University of
Virginia. Mr. Powell 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.
Jayne A. Kosik (age 39) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Managing Director of The Balcor
Company. Ms. Kosik is a Certified Public Accountant.
(d) There is no family relationship between any of the foregoing officers 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 1996.
Item 11. Executive Compensation
- -------------------------------
The Registrant paid $1,698 in 1996 with respect to one of the executive
officers and directors of Balcor Partners-84 II, Inc., the General Partner. The
Registrant has not paid and does not propose to pay any remuneration to the
remaining executive officers and directors of the General Partner. Certain of
the remaining officers receive compensation from The Balcor Company but not
from the Registrant for services performed for various affiliated entities,
which may include services performed for the Registrant. However, the General
Partner believes that any such compensation attributable to services performed
for the Registrant is immaterial to the Registrant. See Note 10 of Notes to
Financial Statements for the information relating to transactions with
affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) No person owns of record or is known by the Registrant to own
beneficially more than 5% of the outstanding Limited Partnership
Interests of the Registrant.
<PAGE>
(b) Balcor Partners-84 II, Inc. and its shareholders, directors, and officers
own as a group the following Limited Partnership Interests of 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 41 additional 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 4 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.
See Note 10 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.
<PAGE>
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 are
incorporated herein by reference.
(10) Material Contracts:
(10)(a)(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, are incorporated
herein by reference.
(ii) Master Amendment and Agreement dated May 22, 1996 relating to the sale of
Ridgetree Apartments, Phase II and Rosehill Pointe Apartments, previously filed
as Exhibit 2(a)(i) to the Registrant's Current Report on Form 8-K dated May 31,
1996, is incorporated herein by reference.
(iii) Master Amendment and Agreement #2 dated May 22, 1996 relating to the sale
of Ridgetree Apartments, Phase II and Rosehill Pointe Apartments, previously
filed as Exhibit 2(a)(ii) to the Registrant's Current Report on Form 8-K dated
May 31, 1996, is incorporated herein by reference.
(b) 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, are incorporated herein by reference.
(c)(i) Agreement of Sale and attachment thereto relating to the sale of
Westwood Village Apartments, previously filed as Exhibit (2) to the
Registrant's Current Report on Form 8-K dated September 4, 1996, are
incorporated herein by reference.
(ii) Modification Agreement relating to the sale of Westwood Village
Apartments, previously filed as Exhibit (10)(c)(ii) to the Registrant's Report
on Form 10-Q for the quarter ended September 30, 1996 is incorporated herein by
reference.
<PAGE>
(iii) Letter Agreement relating to the sale of Westwood Village Apartments,
previously filed as Exhibit (10)(c)(iii) to the Registrant's Report on Form
10-Q for the quarter ended September 30, 1996 is incorporated herein by
reference.
(27) Financial Data Schedule of the Registrant for 1996 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1996.
(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.
<PAGE>
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/ Jayne A. Kosik
------------------------
Jayne A. Kosik
Managing Director and Chief
Financial Officer (Principal
Accounting Officer) of Balcor
Partners-84 II, Inc., the General
Partner
Date: March 28, 1997
------------------
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 28, 1997
- ---------------------- --------------
Thomas E. Meador
Senior Vice President and Director
/s/ James E. Mendelson of Balcor Partners-84 II, Inc. March 28, 1997
- ---------------------- --------------
James E. Mendelson
Managing Director and Chief
Financial Officer (Principal
Accounting Officer)
of Balcor Partners-84 II, Inc.,
/s/ Jayne A. Kosik the General Partner March 28, 1997
- ---------------------- --------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1996 and 1995
Statements of Partners' Deficit, for the years ended December 31, 1996, 1995
and 1994
Statements of Income and Expenses, for the years ended December 31, 1996, 1995
and 1994
Statements of Cash Flows, for the years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1996
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, 1996 and 1995,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, 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.
As described in Note 2 to the financial statements, the Partnership Agreement
provides for the dissolution of the Partnership upon the disposition of all its
real estate interests. The Partnership is presently marketing for sale its
remaining real estate assets. Upon disposition of its remaining real estate
assets and resolution of the litigation described in Note 14 to the financial
statements, the Partnership intends to cease operations and dissolve.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 26, 1997
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
1996 1995
-------------- --------------
Cash and cash equivalents $ 2,025,727 $ 419,227
Escrow deposits 634,200 1,158,746
Accounts and accrued interest receivable 648,039 189,252
Prepaid expenses 44,776 159,160
Deferred expenses, net of accumulated
amortization of $187,891 in 1996 and
$763,343 in 1995 200,423 565,727
-------------- --------------
3,553,165 2,492,112
-------------- --------------
Investment in real estate:
Land 2,714,509 11,076,389
Buildings and improvements 17,638,625 71,945,955
-------------- --------------
20,353,134 83,022,344
Less accumulated depreciation 8,291,565 31,102,341
-------------- --------------
Investment in real estate, net of
accumulated depreciation 12,061,569 51,920,003
-------------- --------------
$ 15,614,734 $ 54,412,115
============== ==============
LIABILITIES AND PARTNERS' DEFICIT
Loans payable - affiliate $ 8,385,555
Accounts payable $ 66,808 141,388
Due to affiliates 134,062 126,650
Accrued liabilities, principally interest
and real estate taxes 147,601 1,078,917
Security deposits 125,211 273,669
Mortgage notes payable 17,211,741 65,239,773
-------------- --------------
Total liabilities 17,685,423 75,245,952
-------------- --------------
Affiliates participation in joint ventures (1,322,633)
--------------
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
BALANCE SHEETS
December 31, 1996 and 1995
(Continued)
Commitments and contingencies
Limited Partners' deficit (87,037 Interests
issued and outstanding) (1,343,455) (18,559,083)
General Partner's deficit (727,234) (952,121)
-------------- --------------
Total partners' deficit (2,070,689) (19,511,204)
-------------- --------------
$ 15,614,734 $ 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 PARTNERS' DEFICIT
for the years ended December 31, 1996, 1995 and 1994
Partners' Deficit Accounts
-----------------------------------------
General Limited
Total Partner Partners (A)
------------- ------------- -------------
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)
Net loss for the year
ended December 31, 1995 (1,414,559) (14,146) (1,400,413)
------------- ------------- -------------
Balance at December 31, 1995 (19,511,204) (952,121) (18,559,083)
Cash distributions to Limited
Partners (B) (5,048,146) (5,048,146)
Net income for the year
ended December 31, 1996 22,488,661 224,887 22,263,774
------------- ------------- -------------
Balance at December 31, 1996 $ (2,070,689) $ (727,234) $ (1,343,455)
============= ============= =============
(A) Includes a $95,000 investment by the General Partner.
(B) Represents distributions paid in the third and fourth
quarter of 1996 of $48.00 and $10.00, respectively, per
Limited Partnership Interest.
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 years ended December 31, 1996, 1995 and 1994
1996 1995 1994
------------- ------------- -------------
Income:
Rental and service $ 9,440,232 $ 15,621,758 $ 16,985,963
Interest on short-term
investments 121,737 55,611 34,580
------------- ------------- -------------
Total income 9,561,969 15,677,369 17,020,543
------------- ------------- -------------
Expenses:
Interest on mortgage
notes payable 3,034,761 5,762,150 6,514,973
Interest on short-term loans
from an affiliate 189,838 544,980 399,006
Depreciation 1,256,642 2,188,762 2,492,641
Amortization of deferred
expenses 132,436 178,088 211,246
Property operating 4,346,155 5,906,395 7,431,340
Real estate taxes 803,569 1,255,631 1,639,635
Property management fees 449,136 768,357 850,097
Administrative 608,540 526,207 870,872
------------- ------------- -------------
Total expenses 10,821,077 17,130,570 20,409,810
------------- ------------- -------------
Loss before gain on sale of
properties, participation
in joint ventures and
extraordinary items (1,259,108) (1,453,201) (3,389,267)
Gain on sales of properties 27,237,296 4,257,709
Affiliates' participation in
(income) loss from joint
ventures (3,288,528) 38,642 75,723
------------- ------------- -------------
Income (loss) before
extraordinary items 22,689,660 (1,414,559) 944,165
------------- ------------- -------------
<PAGE>
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, 1996, 1995 and 1994
(Continued)
Extraordinary items:
Gain on forgiveness of debt 182,585 1,510,773
Debt extinguishment expense (404,529)
Affiliate's participation in
debt extinguishment expense 20,945
------------- ------------
Total extraordinary items (200,999) 1,510,773
------------- ------------- -------------
Net income (loss) $ 22,488,661 $ (1,414,559) $ 2,454,938
============= ============= =============
Income (loss) before
extraordinary items allocated
to General Partner $ 226,898 $ (14,146) $ 9,441
============= ============= =============
Income (loss) before
extraordinary items allocated
to Limited Partners $ 22,462,762 $ (1,400,413) $ 934,724
============= ============= =============
Income (loss) before
extraordinary items per
Limited Partnership Interest
(87,037 issued and
outstanding) $ 258.09 $ (16.09) $ 10.74
============= ============= =============
Extraordinary items allocated
to General Partner $ (2,010) None $ 15,108
============= ============= =============
Extraordinary items allocated
to Limited Partners $ (198,989) None $ 1,495,665
============= ============= =============
Extraordinary items per Limited
Partnership Interest (87,037
issued and outstanding) $ (2.29) None $ 17.18
============= ============= =============
Net income (loss) allocated to
General Partner $ 224,887 $ (14,146) $ 24,549
============= ============= =============
Net income (loss) allocated to
Limited Partners $ 22,263,774 $ (1,400,413) $ 2,430,389
============= ============= =============
Net income (loss) per Limited
Partnership Interest (87,037
issued and outstanding) $ 255.80 $ (16.09) $ 27.92
============= ============= =============
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 years ended December 31, 1996, 1995 and 1994
1996 1995 1994
------------- ------------- -------------
Operating activities:
Net income (loss) $ 22,488,661 $ (1,414,559) $ 2,454,938
Adjustments to reconcile net
income (loss) to net cash
(used in) provided by
operating activities:
Gain on forgiveness
of debt (182,585) (1,510,773)
Debt extinguishment expense 232,868
Affiliate's participation
in debt extinguishment
expense (20,945)
Gain on sale of properties (27,237,296) (4,257,709)
Affiliates' participation
in income (loss) from
joint ventures 3,288,528 (38,642) (75,723)
Depreciation of
properties 1,256,642 2,188,762 2,492,641
Amortization of deferred
expenses 132,436 178,088 211,246
Net change in:
Escrow deposits 524,546 (64,188) 55,113
Accounts and accrued
interest receivable (458,787) 174,800 (298,776)
Prepaid expenses 114,384 (159,160)
Accounts payable (74,580) (29,005) 54,900
Due to affiliates 7,412 (132,007) (9,775)
Accrued liabilities (748,731) (52,148) (615,274)
Security deposits (148,458) (20,253) (78,933)
------------- ------------- -------------
Net cash (used in) provided
by operating activities (825,905) 631,688 (1,578,125)
------------- ------------- -------------
Investing activities:
Proceeds from sales of
properties 67,215,000 17,790,715
Costs incurred in connection
with sales of properties (1,375,912) (241,511)
------------- -------------
Net cash provided by investing
activities 65,839,088 17,549,204
------------- -------------
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 years ended December 31, 1996, 1995 and 1994
(Continued)
1996 1995 1994
------------- ------------- -------------
Financing activities:
Distributions to Limited
Partners $ (5,048,146)
Capital contributions by
joint venture partners-
affiliate $ 42,706 $ 17,320
Distributions to joint
venture partners-
affiliate (1,944,950) (125,529) (89,383)
Proceeds from loans payable-
affiliate 677,000 866,905
Repayment of loans payable-
affiliate (8,385,555) (400,000) (534,073)
Proceeds from issuance of
mortgage notes payable 7,448,362
Principal payments on
mortgage notes payable (619,604) (732,050) (576,339)
Repayment of mortgage notes
payable (47,408,428) (23,693,178)
Payment of deferred expenses (245,985)
------------- ------------- -------------
Net cash used in financing
activities (63,406,683) (537,873) (16,806,371)
------------- ------------- -------------
Net change in cash and cash
equivalents 1,606,500 93,815 (835,292)
Cash and cash equivalents at
beginning of year 419,227 325,412 1,160,704
------------- ------------- -------------
Cash and cash equivalents at
end of year $ 2,025,727 $ 419,227 $ 325,412
============= ============= =============
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. Nature of the Partnership's Business:
Balcor Realty Investors 84-Series II, A Real Estate Limited Partnership
(the "Partnership") is engaged principally in the operation of residential real
estate located in the Gwinnett County, Georgia and Columbus, Ohio markets.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold the La Contenta, Meadow Creek, Ridgetree -
Phase II, Rosehill Pointe, Seabrook and Westwood Village apartment complexes
during 1996. Currently, the Partnership is actively marketing the remaining two
properties in its portfolio. The timing of the termination of the Partnership
and final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. The Partnership
retained a portion of the cash to satisfy obligations of the Partnership as
well as establish a reserve for contingencies. Such contingencies may include
legal and other fees stemming from litigation involving the Partnership
including, but not limited to, the lawsuits discussed in Note 14 of Notes to
Financial Statements. In the absence of any such contingency, the reserves will
be paid within twelve months of the last property being sold. In the event a
contingency exists, reserves may be held by the Partnership for a longer period
of time.
3. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates.
(b) Depreciation expense is computed using the straight-line and accelerated
methods. Rates used in the determination of depreciation are based upon the
following estimated useful lives:
Buildings and land improvements 30 years
Furniture and fixtures 5 years
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.
<PAGE>
As properties are sold, the related costs and accumulated depreciation are
removed from the respective accounts. Any gain or loss on disposition is
recognized in accordance with generally accepted accounting principles.
(c) Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), ("Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of"). Under SFAS 121,
the Partnership records its investments in real estate at the lower of cost or
fair value, and periodically assesses, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimates the fair value of its properties based on the current sales price
less estimated closing costs. In the event the General Partner determines an
impairment in value has occurred, and the carrying amount of the real estate
asset will not be recovered, a provision is recorded to reduce the carrying
basis of the property to its estimated fair value. The General Partner
considers the method referred to above to result in a reasonable measurement of
a property's fair value, unless other factors affecting the property's value
indicate otherwise.
(d) Deferred expenses consist of loan modification and financing fees which are
amortized over the terms of the respective loan agreements. Upon sale, any
remaining balance is recognized as debt extinguishment expense and classified
as an extraordinary item.
(e) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Since quoted market prices are not available for the Partnership's
financial instruments, fair values have been based on estimates using present
value techniques. These techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, may not be realized in
immediate settlement of the instrument. Statement No. 107 does not apply to all
balance sheet items and excludes certain financial instruments and all
non-financial instruments such as real estate from its disclosure requirements.
(f) Cash and cash equivalents include all unrestricted, highly liquid
investments with an original maturity of three months or less. Cash is held or
invested primarily in one financial institution.
(g) 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.
(h) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles.
<PAGE>
4. 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>
5. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1996 and 1995 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 12/31/96 12/31/95 Rate Payment Payment Date
- -------------------- ------------- ----------- -------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Apartment Complexes:
La Contenta (A) None $7,036,403
Meadow Creek (B) None 5,096,878
Park Colony $9,897,707 9,975,000 9.375% $84,294 $9,753,000 1999
Ridgetree (Phase II)(C) None 7,816,515
Rosehill Pointe (D) None 14,478,769
(D) None 1,302,358
Seabrook (E) None 5,081,898
Spring Creek 7,314,034 7,369,551 9.21% 61,060 7,076,000 2000
Westwood Village (F) None 7,082,401
------------ -----------
Total $17,211,741 $65,239,773
============ ============
</TABLE>
<PAGE>
(A) In April 1996, this property was sold. See Note 11 of Notes to Financial
Statements for additional information.
(B) In May 1996, this property was sold. See Note 11 of Notes to Financial
Statements for additional information.
(C) In June 1996, this property was sold. See Note 11 of Notes to Financial
Statements for additional information.
(D) In June 1996, this property was sold. See Note 11 of Notes to Financial
Statements for additional information.
(E) In February 1996, this property was sold. See Note 11 of Notes to
Financial Statements for additional information.
(F) In November 1996, this property was sold. See Note 11 of Notes to
Financial Statements for additional information.
The Partnership's loans described above require current monthly payments of
principal and interest. The Park Colony mortgage loan required monthly
interest-only payments through December 31, 1995. Effective January 1996, the
monthly payments were changed to include principal and interest.
Real estate with an aggregate carrying value of $12,061,569 at December 31,
1996 was pledged as collateral for repayment of mortgage loans.
Future annual maturities of the above mortgage notes payable during each of the
next four years are approximately as follows:
1997 $ 146,000
1998 152,000
1999 9,826,000
2000 7,122,000
During 1996, 1995 and 1994, the Partnership incurred interest expense on
mortgage notes payable of $3,192,587, $5,762,150 and $6,514,973 and paid
interest expense of $3,362,444, $5,829,192 and $6,863,768, respectively.
6. Management Agreements:
As of December 31, 1996, both 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.
7. Seller's Participation in Joint Venture:
Meadow Creek Apartments was owned by a joint venture between the Partnership
and the seller. Consequently, the seller retained an interest in the property
through an interest in the joint venture. All assets, liabilities, income and
expenses of the joint venture were 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. The property was sold in May 1996.
The seller did not receive any proceeds from the sale of the property.
<PAGE>
8. Affiliates' Participation in Joint Ventures:
Rosehill Pointe Apartments was owned by the Partnership and an affiliate
(Balcor Realty Investors 85 - Series II) prior to its sale in June 1996.
Profits and losses were allocated 61.62% to the Partnership and 38.38% to the
affiliate. In addition, Seabrook Apartments was owned by the Partnership and
two affiliates (Balcor Realty Investors 85 - Series I and Balcor Realty
Associates) prior to its sale in February 1996. Profits and losses were
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 the appropriate adjustment for
profit or loss for each affiliate's participation. Net distributions of
$1,944,950, $82,823 and $72,063 were made to joint venture partners during
1996, 1995 and 1994, respectively. In addition, joint venture partners were
allocated their pro rata share of the gains on the sales of the Rosehill and
Seabrook apartment complexes of $3,055,484 and $228,084, respectively.
9. 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
accordance with generally accepted accounting principles, will differ from the
tax returns due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net income for 1996 in the financial statements is $11,286,598 less than
the taxable income for the same period.
10. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
----------------- --------------------- --------------------
Paid Payable Paid Payable Paid Payable
--------- ------- ---------- --------- --------- ---------
Property manage-
ment fees None None None None $827,716 None
Reimbursement of
expenses to
General Partner
at cost:
Accounting $13,048 $14,548 $53,668 $4,094 80,957 $31,333
Data processing 5,764 3,057 35,823 3,392 64,251 14,023
Investment
processing None None None None 7,068 571
Investor com-
munications None None 6,701 None 12,403 5,388
Legal 14,075 15,692 30,858 4,769 15,160 9,948
Other None None 5,790 None 25,194 4,658
Portfolio
management 81,240 90,576 117,173 18,971 65,385 32,097
<PAGE>
Property sales
admini-
stration 29,942 10,189 9,056 7,938 11,274 None
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 (The Balcor
Company) who receives no fee for administering the program; however, the
General Partner is reimbursed for program expenses. The Partnership paid
premiums to the deductible insurance program of $17,353, $122,696 and $186,498
in 1996, 1995 and 1994, respectively.
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed the
Partnership's properties until the affiliate was sold to a third party in
November 1994.
During the first six months of 1996, the Partnership repaid the General Partner
loan, which had an outstanding balance of $8,385,555 at December 31, 1995,
primarily with proceeds from the sales of the Seabrook, La Contenta and Meadow
Creek apartment complexes. See Note 10 of Notes to Financial Statements for
additional information. During 1996, 1995 and 1994, the Partnership incurred
interest expense of $189,838, $544,980 and $399,006 and paid interest expense
of $277,324, 618,133 and $378,243 on these loans, respectively. Interest
expense was computed at the American Express Company cost of funds rate plus a
spread to cover administrative expenses. The interest rate was 5.911% at the
date of the loan repayment.
11. Property Sales:
(a) The Seabrook Apartments was owned by a joint venture consisting of the
Partnership and two affiliates. The Partnership and the affiliates held
participating percentages in the joint venture of 83.72% and 16.28%,
respectively. In February 1996, the joint venture sold the property in an all
cash sale for $5,915,000. From the proceeds of the sale, the joint venture paid
$5,081,898 to the third party mortgage holder in full satisfaction of the first
mortgage loan, and paid $190,517 in selling costs. The basis of the property
was $4,361,052, which is 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 is the minority joint venture
partners' share.
(b) In April 1996, the Partnership sold the La Contenta Apartments in an all
cash sale for $11,300,000. From the proceeds of the sale, the Partnership paid
$6,970,559 to the third party mortgage holder in full satisfaction of the first
mortgage loan, and paid $236,400 in selling costs and $69,765 in prepayment
penalties. The basis of the property was $4,737,918, which is net of
accumulated depreciation of $3,049,224. For financial statement purposes, the
Partnership recognized a gain of $6,325,682 from the sale of this property.
(c) In May 1996, the Partnership sold the Meadow Creek Apartments in an all
cash sale for $11,100,000. From the proceeds of the sale, the Partnership paid
$5,076,321 to the third party mortgage holder in full satisfaction of the first
<PAGE>
mortgage loan, and paid $365,650 in selling costs and $101,896 in prepayment
penalties. The basis of the property was $4,195,785, which is net of
accumulated depreciation of $2,861,903. For financial statement purposes, the
Partnership recognized a gain of $6,538,565 from the sale of this property.
(d) In June 1996, the Partnership sold the Ridgetree Apartments - Phase II in
an all cash sale for $9,200,000. From the proceeds of the sale, the Partnership
paid $7,798,124 to the third party mortgage holder in full satisfaction of the
first and second mortgage loans, and paid $107,000 in selling costs. The basis
of the property was $6,909,090, which is net of accumulated depreciation of
$4,455,600. For financial statement purposes, the Partnership recognized a gain
of $2,183,910 from the sale of this property.
(e) The Rosehill Pointe Apartments was owned by a joint venture consisting of
the Partnership and an affiliate. The Partnership and the affiliate hold
participating percentages in the joint venture of 61.62% and 38.38%,
respectively. In June 1996, the joint venture sold the property in an all cash
sale for $20,700,000. From the proceeds of the sale, the joint venture paid
$15,537,677 to the third party mortgage holders in full satisfaction of the
first and second mortgage loans, and paid $170,250 in selling costs. The basis
of the property was $12,609,551, which is net of accumulated depreciation of
$7,424,419. For financial statement purposes, the Partnership recognized a gain
of $7,920,199 from the sale of this property, of which $3,055,484 is the
minority joint venture partner's share.
(f) In November 1996, the Partnership sold the Westwood Village Apartments in
an all cash sale for $9,000,000. From the proceeds of the sale, the Partnership
repaid the outstanding balances of the first and second mortgage loans of
$6,792,853 and $150,996, respectively, and paid $306,095 in selling costs. The
basis of the property was $5,788,396, which is net of accumulated depreciation
of $3,651,046. For financial statement purposes, the Partnership recognized a
gain of $2,905,509 from the sale of this property.
12. Extraordinary Items:
(a) During 1996, the Partnership recognized an extraordinary gain on
forgiveness of debt of $182,585 as a result of the sale of the Westwood Village
Apartments.
(b) In connection with the sales of the La Contenta and Meadow Creek apartment
complexes during 1996, the Partnership paid $171,661 of prepayment penalties.
In addition, the Partnership wrote off the remaining unamortized deferred
financing fees in the amount of $232,868 as a result of the sales of the La
Contenta, Meadow Creek, Ridgetree - Phase II, Rosehill Pointe and Westwood
Village apartment complexes during 1996. These amounts were recognized as an
extraordinary item and classified as debt extinguishment expense of $404,529,
of which $20,945 represents the Rosehill Pointe Apartments affiliate's share.
(c) 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 $18,459,448, including accrued interest were repaid for
$16,593,178. The Partnership also wrote off the remaining $355,537 of
unamortized loan modification fees related to the 1989 modifications of these
mortgage notes. As a result, the Partnership recognized an extraordinary gain
on forgiveness of debt totaling $1,510,773 in 1994.
<PAGE>
13. Fair Value of Financial Instruments:
The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1996 and 1995 are as follows:
The carrying value of cash and cash equivalents, accounts and accrued interest
receivable, accounts and accrued interest payable approximates fair value.
Mortgage notes payable: Based on borrowing rates available to the Partnership
at the end of 1996 and 1995 for mortgage loans with similar terms and
maturities, the fair value of the mortgage notes payable approximates the
carrying value.
14. Contingency:
The Partnership is currently involved in two lawsuits whereby the Partnership
and certain affiliates have been named as defendants alleging substantially
similar claims involving certain federal securities law violations with regard
to the adequacy and accuracy of disclosures of information concerning, as well
as marketing efforts related to, the offering of the Limited Partnership
Interests of the Partnership. The defendants continue to vigorously contest
these actions. A plaintiff class has not been certified in either action and,
no determinations of the merits have been made. It is not determinable at this
time whether or not an unfavorable decision in either action would have a
material adverse impact on the financial position, operations and liquidity of
the Partnership. The Partnership believes it has meritorious defenses to
contest the claims.
15. Subsequent Event:
In January 1997, the Partnership paid $870,370 ($10 per Interest) to Limited
Partners, representing a special distribution comprised primarily of Net Cash
Proceeds received in connection with the sale of the Westwood Village
Apartments.
<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, 1996
<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>
Park Colony Apts.,
352-units in
Gwinnett County, GA (d) 1,450,000 9,000,000 $44,720 1,255,336 None
Spring Creek Apts., 288-
units in Columbus, OH (d) 1,400,000 7,005,000 None 1,054,199 (856,121)(f)
----------- ----------- -------- ----------- -----------
Total $2,850,000 $16,005,000 $44,720 $2,309,535 $(856,121)
=========== =========== ======== =========== ===========
</TABLE>
See Notes (a) through (f).
<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, 1996
(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>
Park Colony Apts.,
352-units in
Gwinnett County, GA $1,451,544 $10,298,512 $11,750,056 $4,874,098 1984 5/83 (e)
Spring Creek Apts., 288-
units in Columbus, OH 1,262,965 7,340,113 8,603,078 3,417,467 1985 2/84 (e)
----------- ----------- ----------- -----------
Total $2,714,509 $17,638,625 $20,353,134 $8,291,565
=========== =========== =========== ===========
</TABLE>
See Notes (a) through (f).
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
NOTES TO SCHEDULE III
(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 $2,840,868
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $16,005,888. The total of the above-mentioned is $18,846,756.
(c)
Reconciliation of Real Estate
- ------------------------------
1996 1995 1994
----------- ------------- -------------
Balance at beginning of year $83,022,344 $83,022,344 $102,280,525
Reductions during the year:
Cost of real estate sold (62,669,210) (19,258,181)
------------ ------------- -------------
Balance at end of year $20,353,134 $83,022,344 $83,022,344
============ ============= =============
Reconciliation of Accumulated Depreciation
-------------------------------------------
1996 1995 1994
------------ ------------ --------------
Balance at beginning of year $31,102,341 $28,913,579 $32,387,624
Depreciation expense
for the year 1,256,642 2,188,762 2,492,641
Accumulated depreciation of
real estate sold (24,067,418) (5,966,686)
----------- ------------ ------------
Balance at end of year $ 8,291,565 $31,102,341 $28,913,579
=========== =========== ============
(d) See description of Mortgage Notes Payable in Note 5 of Notes to Financial
Statements.
(e) Depreciation expense is computed based upon the following estimated useful
lives:
Buildings and improvements 30 years
Furniture and fixtures 5 years
(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.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2026
<SECURITIES> 0
<RECEIVABLES> 648
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3353
<PP&E> 20353
<DEPRECIATION> 8292
<TOTAL-ASSETS> 15615
<CURRENT-LIABILITIES> 474
<BONDS> 17212
0
0
<COMMON> 0
<OTHER-SE> (2071)
<TOTAL-LIABILITY-AND-EQUITY> 15615
<SALES> 0
<TOTAL-REVENUES> 33511
<CGS> 0
<TOTAL-COSTS> 5599
<OTHER-EXPENSES> 1998
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3225
<INCOME-PRETAX> 22690
<INCOME-TAX> 0
<INCOME-CONTINUING> 22690
<DISCONTINUED> 0
<EXTRAORDINARY> (201)
<CHANGES> 0
<NET-INCOME> 22489
<EPS-PRIMARY> 255.80
<EPS-DILUTED> 255.80
</TABLE>
