SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1998
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-13334
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BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 36-3223939
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (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
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<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
ASSETS
1998 1997
-------------- --------------
Cash and cash equivalents $ 2,032,290 $ 2,902,925
Accounts and accrued interest receivable 10,192 18,051
-------------- --------------
$ 2,042,482 $ 2,920,976
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 37,088 $ 30,525
Due to affiliates 53,262 36,092
-------------- --------------
Total liabilities 90,350 66,617
-------------- --------------
Commitments and contingencies
Limited Partners' capital (87,037
Interests issued and outstanding) 2,549,194 3,451,421
General Partner's deficit (597,062) (597,062)
-------------- --------------
Total partners' capital 1,952,132 2,854,359
-------------- --------------
$ 2,042,482 $ 2,920,976
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1998 and 1997
(Unaudited)
1998 1997
-------------- --------------
Income:
Rental and service $ 1,970,579
Interest on short-term investments $ 86,814 127,768
-------------- --------------
Total income 86,814 2,098,347
-------------- --------------
Expenses:
Interest on mortgage notes payable 771,770
Depreciation 246,374
Amortization of deferred expenses 31,315
Property operating 996,240
Real estate taxes 193,078
Property management fees 103,726
Other expenses 176,685
Administrative 185,154 242,403
-------------- --------------
Total expenses 185,154 2,761,591
-------------- --------------
Loss before gain on sales of properties
and extraordinary item (98,340) (663,244)
Gain on sales of properties 12,350,293
-------------- --------------
(Loss) income before extraordinary item (98,340) 11,687,049
Extraordinary item:
Debt extinguishment expense (921,926)
-------------- --------------
Net (loss) income $ (98,340) $ 10,765,123
============== ==============
Income before extraordinary
item allocated to General Partner None $ 141,559
============== ==============
(Loss) income before extraordinary
item allocated to Limited Partners $ (98,340) $ 11,545,490
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1998 and 1997
(Unaudited)
(Continued)
1998 1997
-------------- --------------
(Loss) income before extraordinary
item per Limited Partnership Interest
(87,037 issued and outstanding)
- Basic and Diluted $ (1.13) $ 132.65
============== ==============
Extraordinary item allocated to
General Partner None $ (11,387)
============== ==============
Extraordinary item allocated to
Limited Partners None $ (910,539)
============== ==============
Extraordinary item per Limited
Partnership Interest (87,037 issued
and outstanding) - Basic and Diluted None $ (10.46)
============== ==============
Net income allocated to General Partner None $ 130,172
============== ==============
Net (loss) income allocated to Limited
Partners $ (98,340) $ 10,634,951
============== ==============
Net (loss) income per Limited Partnership
Interest (87,037 issued and outstanding)
- Basic and Diluted $ (1.13) $ 122.19
============== ==============
Distributions to Limited Partners $ 803,887 $ 2,175,925
============== ==============
Distributions per Limited Partnership
Interest (87,037 issued and outstanding) $ 9.24 $ 25.00
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1998 and 1997
(Unaudited)
1998 1997
-------------- --------------
Income:
Interest on short-term investments $ 28,595 $ 85,054
-------------- --------------
Total income 28,595 85,054
-------------- --------------
Expenses:
Property operating 86,216
Administrative 46,938 56,885
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Total expenses 46,938 143,101
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Net loss $ (18,343) $ (58,047)
============== ==============
Net loss allocated to General Partner None $ (3,508)
============== ==============
Net loss allocated to Limited Partners $ (18,343) $ (54,539)
============== ==============
Net loss per Limited Partnership Interest
(87,037 issued and outstanding)
- Basic and Diluted $ (0.21) $ (0.63)
============== ==============
Distribution to Limited Partners None $ 1,305,555
============== ==============
Distribution per Limited Partnership
Interest (87,037 issued and outstanding) None $ 15.00
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1998 and 1997
(Unaudited)
1998 1997
-------------- --------------
Operating activities:
Net (loss) income $ (98,340) $ 10,765,123
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Debt extinguishment expense 169,108
Gain on sales of properties (12,350,293)
Depreciation of properties 246,374
Amortization of deferred expenses 31,315
Net change in:
Escrow deposits 634,200
Accounts and accrued
interest receivable 7,859 606,491
Prepaid expenses 44,776
Accounts payable 6,563 (40,817)
Due to affiliates 17,170 (72,216)
Accrued liabilities (147,601)
Security deposits (125,211)
-------------- --------------
Net cash used in operating activities (66,748) (238,751)
-------------- --------------
Investing activities:
Proceeds from sales of properties 24,725,000
Payment of selling costs (559,512)
--------------
Net cash provided by investing activities 24,165,488
--------------
Financing activities:
Distributions to Limited Partners (803,887) (2,175,925)
Deemed distribution to Limited Partners (359,486)
Principal payments on mortgage notes
payable (25,686)
Repayment of mortgage notes payable (17,186,055)
-------------- --------------
Cash used in financing activities (803,887) (19,747,152)
-------------- --------------
Net change in cash and cash equivalents (870,635) 4,179,585
Cash and cash equivalents at beginning
of year 2,902,925 2,025,727
-------------- --------------
Cash and cash equivalents at end of period $ 2,032,290 $ 6,205,312
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) The loss allocation between the Limited Partners and the General Partner
has been adjusted for financial statement purposes in order that the capital
account balances more accurately reflect their remaining economic interests as
provided for in the Partnership Agreement.
(b) In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the nine months
and quarter ended September 30, 1998, and all such adjustments are of a normal
and recurring nature.
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. During 1997, the Partnership sold its two remaining properties.
The Partnership has retained a portion of the cash from the property sales to
satisfy obligations of the Partnership as well as to establish a reserve for
contingencies. 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. Such contingencies may include legal
and other fees and costs stemming from litigation involving the Partnership
including, but not limited to, the lawsuits discussed in Note 5 of Notes to the
Financial Statements. Due to this litigation, the Partnership will not be
dissolved and reserves will be held by the Partnership until the conclusion of
all contingencies. There can be no assurances as to the time frame for
conclusion of these contingencies.
3. Interest Expense:
During the nine months ended September 30, 1997, the Partnership incurred
interest expense of $771,770 and paid interest expense of $738,380 on mortgage
notes payable.
4. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1998 were:
Paid
-------------------------
Nine Months Quarter Payable
------------ --------- ---------
Reimbursement of expenses to
the General Partner, at cost $ 19,606 $ 7,481 $ 53,262
<PAGE>
5. Contingencies:
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 state securities and common law violations
with regard to the property acquisition process of the Partnership, and 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. No
determination of the merits has been made in one action. The other action was
dismissed without prejudice by the trial court on September 24, 1998 for
failure to state a cause of action. 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 of the Partnership. The Partnership believes
it has meritorious defenses to contest the claims.
<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 no properties remaining
in its portfolio at September 30, 1998.
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 1997 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
Summary of Operations
- ---------------------
Administrative expenses were higher than interest income earned on short-term
investments, which resulted in a net loss during the nine months and quarter
ended September 30, 1998. In June 1997, the Partnership sold its two remaining
properties and recognized significant gains from the sales, which resulted in
net income during the nine months ended September 30, 1997. Administrative and
property operating expenses were higher than interest income earned on
short-term investments during the quarter ended September 30, 1997. This was
the primary reason the Partnership recognized a net loss during the quarter
ended September 30, 1997. Further discussion of the Partnership's operations is
summarized below.
1998 Compared to 1997
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1998 and 1997 refer
to both the nine months and quarters ended September 30, 1998 and 1997.
The Partnership sold the Spring Creek and Park Colony apartment complexes
during June 1997 and recognized gains totaling $12,350,293 in connection with
these sales. As a result of these sales, rental and service income, interest
expense on mortgage notes payable, depreciation, amortization, property
operating expenses, real estate taxes and property management fees ceased
during 1997.
The Partnership had higher average cash balances in 1997 resulting from the
investment of the available proceeds from the 1997 property sales prior to
<PAGE>
distribution to Limited Partners in January 1998. As a result, interest income
on short-term investments decreased during 1998 as compared to 1997.
In connection with the 1996 sale of Meadow Creek Apartments, the Partnership
paid $176,685 in April 1997 for a state income tax liability related to the
gain on sale, which was recorded as other expense in 1997 for financial
statement purposes.
Administrative expenses decreased during 1998 as compared to 1997 primarily due
to a decrease in accounting, portfolio management, data processing and bank
fees, which were partially offset by higher legal fees accrued in 1998.
In connection with the sales of the Spring Creek and Park Colony apartment
complexes in 1997, the Partnership paid $752,818 in prepayment penalties and
wrote off the remaining unamortized deferred expenses of $169,108. These
amounts were recorded as extraordinary items and classified as debt
extinguishment expense for financial statement purposes.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased by approximately $871,000 as of
September 30, 1998 when compared to December 31, 1997 primarily due to the
payment of a distribution to Limited Partners in January 1998 of remaining
available Net Cash Proceeds. The Partnership used cash of approximately $67,000
to fund its operating activities, which consisted of the payment of
administrative expenses which were partially offset by the receipt of interest
income earned on short-term investments. The Partnership used cash to fund its
financing activities which consisted of a distribution to Limited Partners of
approximately $804,000.
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. During 1997, the Partnership sold its two remaining properties.
The Partnership has retained a portion of the cash from the property sales to
satisfy obligations of the Partnership as well as to establish a reserve for
contingencies. 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. Such contingencies may include legal
and other fees and costs stemming from litigation involving the Partnership
including, but not limited to, the lawsuits discussed in Note 5 of Notes to the
Financial Statements. Due to this litigation, the Partnership will not be
dissolved and reserves will be held by the Partnership until the conclusion of
all contingencies. There can be no assurances as to the time frame for the
conclusion of these contingencies.
To date, Limited Partners have received distributions of Net Cash Proceeds
totaling $130.24 per $1,000 Interest, as well as certain tax benefits. No
distributions are anticipated to be made prior to the termination of the
Partnership. However, after paying final partnership expenses, any remaining
cash reserves will be distributed. Investors will not recover a substantial
portion of their original investment.
<PAGE>
BALCOR REALTY INVESTORS 84-SERIES II,
A REAL ESTATE LIMITED PARTNERSHIP
(A Maryland Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Klein, et al. vs Lehman Brothers, Inc., et al.
- -----------------------------------------------
With regard to the proposed complaint, Lenore Klein, et al. vs. Lehman
Brothers, Inc. et al. (Superior Court of New Jersey, Law Division, Union
County, Docket No. Unn-L-5162-96), on June 9, 1998 the defendants filed a
motion to dismiss the complaint for failure to state a cause of action. The
motion was briefed by all parties and oral argument was heard by the court on
August 21, 1998. On September 24, 1998, the judge issued a letter opinion
granting the defendant's motion to dismiss the complaint, and on October 23,
1998, the judge announced that he would enter an order dismissing the complaint
without prejudice.
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) is incorporated
herein by reference.
(10) Material Contracts:
(a) (i) Agreement of Sale and attachment thereto relating to the sale of Park
Colony Apartments, previously filed as Exhibit (10)(d)(i) to the Registrant's
Report on Form 10-Q for the quarter ended March 31, 1997 is incorporated herein
by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of Park Colony
Apartments, previously filed as Exhibit (10)(d)(ii) to the Registrant's Report
on Form 10-Q for the quarter ended March 31, 1997 is incorporated herein by
reference.
(iii) Second Amendment to Agreement of Sale relating to the sale of Park Colony
Apartments, Gwinnett County, Georgia, previously filed as Exhibit (10)(d)(iii)
to the Registrant's Report on Form 10-Q for the quarter ended June 30, 1997 is
incorporated herein by reference.
<PAGE>
(iv) Third Amendment to Agreement of Sale relating to the sale of Park Colony
Apartments, previously filed as Exhibit (99) to the Registrant's Report on Form
8-K dated May 30, 1997 is incorporated herein by reference.
(b) Agreement of Sale and attachment thereto relating to the sale of Spring
Creek Apartments previously filed as Exhibit (2) to the Registrant's Report on
Form 8-K dated May 30, 1997 is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine months ended
September 30, 1998 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended September 30, 1998.
<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, Chief Executive Officer (Principal
Executive Officer) and Director of Balcor
Partners-84 II, Inc., the General Partner
By: /s/ Jayne A. Kosik
---------------------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal Accounting
Officer) of Balcor Partners-84 II, Inc.,
the General Partner
Date: November 9, 1998
---------------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 2032
<SECURITIES> 0
<RECEIVABLES> 10
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2042
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2042
<CURRENT-LIABILITIES> 90
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1952
<TOTAL-LIABILITY-AND-EQUITY> 2042
<SALES> 0
<TOTAL-REVENUES> 87
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 185
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (98)
<INCOME-TAX> 0
<INCOME-CONTINUING> (98)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98)
<EPS-PRIMARY> (1.13)
<EPS-DILUTED> (1.13)
</TABLE>
