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
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EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-14353
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BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3244978
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
- ----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
------------- --------------
Cash and cash equivalents $ 3,699,291 $ 6,475,393
Accounts and accrued interest receivable 17,226 28,827
Other assets - principally escrow deposits 1,739,049 1,140,420
Prepaid expenses 270,114
Deferred expenses, net of accumulated
amortization of $327,165 in 1995
and $213,273 in 1994 1,069,228 973,153
------------- --------------
6,794,908 8,617,793
------------- --------------
Investment in real estate, at cost:
Land 12,380,326 12,380,326
Buildings and improvements 65,940,832 65,940,832
------------- --------------
78,321,158 78,321,158
Less accumulated depreciation 28,470,834 27,027,028
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Investment in real estate, net of
accumulated depreciation 49,850,324 51,294,130
------------- --------------
$ 56,645,232 $ 59,911,923
============= ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 156,145 $ 133,743
Due to affiliates 25,092 75,413
Accrued liabilities, principally
real estate taxes 700,503 366,628
Security deposits 264,055 288,084
Losses in excess of investments in joint
ventures with affiliates 366,655 553,742
Mortgage notes payable 56,660,609 57,381,930
------------- --------------
Total liabilities 58,173,059 58,799,540
Partners' (deficit) capital (82,697
Limited Partnership Interests issued
and outstanding) (1,527,827) 1,112,383
------------- --------------
$ 56,645,232 $ 59,911,923
============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
------------- --------------
Income:
Rental and service $ 11,511,463 $ 11,181,947
Interest on short-term investments 284,757 143,758
Participation in income (losses) of joint
ventures with affiliates 711,278 (261,696)
------------- --------------
Total income 12,507,498 11,064,009
------------- --------------
Expenses:
Interest on mortgage notes payable 3,632,583 3,717,168
Depreciation 1,443,806 1,443,806
Amortization of deferred expenses 113,892 120,280
Property operating 3,716,683 3,730,718
Real estate taxes 752,918 727,330
Property management fees 568,637 555,102
Administrative 412,652 402,454
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Total expenses 10,641,171 10,696,858
------------- --------------
Income before extraordinary item 1,866,327 367,151
Extraordinary item:
Gain on forgiveness of debt 41,798
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Net income $ 1,908,125 $ 367,151
============= ==============
Income before extraordinary item
allocated to General Partner $ 18,663 $ 3,672
============= ==============
Income before extraordinary item
allocated to Limited Partners $ 1,847,664 $ 363,479
============= ==============
Income before extraordinary item
per Limited Partnership Interest
(82,697 issued and outstanding) $ 22.34 $ 4.40
============= ==============
Extraordinary item allocated to
General Partner $ 418 None
============= ==============
Extraordinary item allocated to
Limited Partners $ 41,380 None
============= ==============
Extraordinary item per Limited
Partnership Interest
(82,697 issued and outstanding) $ 0.50 None
============= ==============
Net income allocated to General Partner $ 19,081 $ 3,672
<PAGE>
============= ==============
Net income allocated to Limited Partners $ 1,889,044 $ 363,479
============= ==============
Net income per Limited Partnership
Interest (82,697 issued and outstanding) $ 22.84 $ 4.40
============= ==============
Distributions to Limited Partners $ 4,548,335 None
============= ==============
Distributions per Limited
Partnership Interest $ 55.00 None
============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1995 and 1994
(Unaudited)
1995 1994
------------- --------------
Income:
Rental and service $ 3,885,192 $ 3,849,277
Interest on short-term investments 76,981 70,121
------------- --------------
Total income 3,962,173 3,919,398
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Expenses:
Interest on mortgage notes payable 1,143,245 1,296,951
Depreciation 481,267 481,267
Amortization of deferred expenses 41,645 53,657
Property operating 1,557,467 1,433,705
Real estate taxes 251,058 244,332
Property management fees 196,216 189,979
Administrative 141,216 92,898
Participation in losses of joint
ventures with affiliates 22,283 114,991
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Total expenses 3,834,397 3,907,780
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Net income $ 127,776 $ 11,618
============= ==============
Net income allocated to General Partner $ 1,278 $ 116
============= ==============
Net income allocated to Limited Partners $ 126,498 $ 11,502
============= ==============
Net income per Limited Partnership
Interest (82,697 issued and outstanding) $ 1.53 $ 0.14
============= ==============
Distribution to Limited Partners $ 3,721,365 None
============= ==============
Distribution per Limited
Partnership Interest $ 45.00 None
============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1995 and 1994
(Unaudited)
1995 1994
------------- --------------
Operating activities:
Net income $ 1,908,125 $ 367,151
Adjustments to reconcile net income
to net cash provided by
operating activities:
Gain on forgiveness of debt (41,798)
Participation in income (losses)
of joint ventures with affiliates (711,278) 261,696
Depreciation of properties 1,443,806 1,443,806
Amortization of deferred expenses 113,892 120,280
Net change in:
Accounts and accrued
interest receivable 11,601 404,972
Other assets (319,307) (289,727)
Prepaid expenses (270,114)
Accounts payable 22,402 63,412
Due to affiliates (50,321) 74,858
Accrued liabilities 333,875 304,131
Security deposits (24,029) (5,140)
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Net cash provided by operating activities 2,416,854 2,745,439
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Investing activities:
Capital contributions to joint
ventures with affiliates (25,323) (10,372)
Distributions from joint ventures
with affiliates 549,514 109,456
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Net cash provided by investing activities 524,191 99,084
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Financing activities:
Distributions to Limited Partners (4,548,335)
Repayment of mortgage note payable (7,786,649) (10,563,000)
Proceeds from issuance of mortgage
notes payable 8,140,000 12,890,000
Principal payments on mortgage
notes payable (1,032,874) (687,008)
Disbursements from improvement escrows 89,678
Payment of deferred expenses (209,967) (396,202)
Funding of improvement escrows (369,000) (547,760)
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Net cash used in or provided
by financing activities (5,717,147) 696,030
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Net change in cash and cash equivalents (2,776,102) 3,540,553
Cash and cash equivalents at beginning
of period 6,475,393 3,129,791
------------- --------------
Cash and cash equivalents at end of period $ 3,699,291 $ 6,670,344
============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the nine months and quarter
ended September 30, 1995, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1995 and 1994, the Partnership
incurred and paid interest expense on mortgage notes payable to unaffiliated
parties of $3,632,583 and $3,717,168.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1995 are:
Paid
-----------------------
Nine Months Quarter Payable
------------ --------- --------
Reimbursement of expenses to
the General Partner, at cost $182,359 $25,299 $25,092
4. Investment in Joint Venture With Affiliate:
Pinebrook Apartments was acquired by a joint venture consisting of the
Partnership and an affiliate. The Partnership and the affiliate hold
participating percentages in the joint venture of 48.43% and 51.57%,
respectively. In February 1995, the joint venture sold the property for a sale
price of $6,140,000. From the proceeds of the sale, $5,058,226 was paid to
third party mortgage holders in satisfaction of the first, second and fourth
mortgage loans, as well as a brokerage commission and other closing costs. The
joint venture recognized a gain of $1,814,970 from the sale of this property,
of which $780,279 was the Partnership's share. Total proceeds received from the
sale of this property were $871,599, of which $422,115 was the Partnership's
share. The Partnership's share of the gain is included in "Participation in
income of joint ventures with affiliates" and is partially offset by the
Partnership's share of operating losses through the sale date.
5. Refinancing:
In May 1995, the Boulder Springs Apartments mortgage loan was refinanced. The
interest rate decreased from 12.875% to 7.59%, the maturity date was extended
from June 1995 to June 2002, and the monthly payment decreased from $90,457 to
$57,419. A portion of the proceeds from the new $8,140,000 first mortgage loan
was used to repay the existing first mortgage loan balance of $7,786,649.
<PAGE>
6. Subsequent Event:
In October 1995, the Partnership made a distribution of $1,860,683 ($22.50 per
Interest) to the holders of Limited Partnership Interests representing a
regular quarterly distribution of Net Cash Receipts of $7.50 per Interest for
the third quarter of 1995, a special distribution of $6.00 per Interest from
Net Cash Receipts reserves, and a special distribution of $9.00 per Interest
from Net Cash Proceeds reserves.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Realty Investors 85 - Series I A Real Estate Limited Partnership
(the "Partnership") was formed in 1983 to invest in and operate
income-producing real property. The Partnership raised $82,697,000 through
the sale of Limited Partnership Interests and utilized these proceeds to
acquire ten real property investments and minority joint venture interests
in three additional properties. During 1995, the Partnership sold one of
its minority joint venture interests, and, in prior years, sold two of the
properties and relinquished one of the properties through foreclosure. The
Partnership continues to operate the remaining seven real property
investments and two minority joint venture interests.
Inasmuch as the management's discussion and analysis below relates
primarily to the time period since the end of the last fiscal year,
investors are encouraged to review the financial statements and the
management's discussion and analysis contained in the annual report for
1994 for a more complete understanding of the Partnership's financial
position.
Operations
- ----------
Summary of Operations
- ---------------------
The Pinebrook Apartments, which was owned by a joint venture consisting of
the Partnership and an affiliate, was sold in February 1995. The
Partnership recognized its share of the gain on sale which is the primary
reason the Partnership generated higher net income in 1995 as compared to
1994. In addition, the Partnership had improved operations at certain of
the Partnership's properties. Further discussion of the Partnership's
operations is summarized below.
1995 Compared to 1994
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1995 and 1994
refer to both the quarter and nine months ended September 30, 1995 and
1994.
Interest income on short-term investments increased in 1995 as compared to
1994 due to higher average cash balances and an increase in interest rates
earned on short-term investments.
Interest on mortgage notes payable decreased for the quarter ended
September 30, 1995 when compared to the same period in 1994 due to the May
1995 refinancing of the Boulder Springs Apartments mortgage loan.
Due to increased third party professional fees, administrative expenses
increased during the quarter ended September 30, 1995 when compared to the
same period in 1994.
Pinebrook Apartments, in which the Partnership held a minority joint
venture interest, was sold during February 1995. As a result of the gain
<PAGE>
recognized in connection with the sale, the Partnership recognized income
from participation in joint ventures with affiliates during the nine months
ended September 30, 1995 as compared to a loss during the same period in
1994. In addition, the Partnership recognized a smaller loss from
participation in joint ventures with affiliates for the quarter ended
September 30, 1995 as compared to the same period in 1994 due to the sale
of Pinebrook Apartments which had been operating at a loss.
During 1995, the Partnership recognized an extraordinary gain on
forgiveness of debt of $41,798 in connection with a settlement reached with
the seller of the Templeton Park Apartments.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased as of September 30, 1995
when compared to December 31, 1994, primarily due to a special distribution
paid to the Limited Partners in July 1995.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A
deficit is considered to be significant if it exceeds $250,000 annually or
20% of the property's rental and service income. The Partnership defines
cash flow generated from its properties as an amount equal to the
property's revenue receipts less property related expenditures, which
include debt service payments. During 1995 and 1994, all seven of the
Partnership's remaining properties generated positive cash flow. Of the
remaining two properties in which the Partnership holds minority joint
venture interests, North Hill Apartments generated positive cash flow while
Seabrook Apartments generated a marginal cash flow deficit during the nine
months ended September 30, 1995 and 1994. Pinebrook Apartments, in which
the Partnership held a minority joint venture interest, was sold in
February 1995 and generated a marginal cash flow deficit in both 1995 and
1994.
While the cash flow of certain of the Partnership's properties has
improved, the General Partner continues to pursue a number of actions aimed
at improving the cash flow of the Partnership's properties including
improving operating performance and seeking rent increases where market
conditions allow. As of September 30, 1995, the occupancy rates of the
Partnership's properties ranged from 95% to 99%. Despite improvements
during 1994 and 1995 in the local economies and rental markets where
certain of the Partnership's properties are located, the General Partner
believes that continued ownership of many of the properties is in the best
interest of the Partnership in order to maximize potential returns to
Limited Partners. As a result, the Partnership will continue to own these
properties for longer than the holding period for the assets originally
described in the prospectus.
Each of the Partnership's properties is owned through the use of
third-party mortgage loan financing and, therefore, the Partnership is
subject to the financial obligations required by such loans. As a result
of the General Partner's successful efforts to obtain loan modifications,
as well as refinancings of many existing loans with new lenders, the
Partnership has no third party financing which matures prior to 1997.
In May 1995, the Boulder Springs mortgage loan was refinanced. Proceeds
from the new loan of $8,140,000 were used to pay the existing loan of
<PAGE>
$7,786,649. See Note 5 of Notes to the Financial Statements for additional
information.
The Pinebrook Apartments was owned by a joint venture consisting of the
Partnership and an affiliate. In February 1995, the joint venture sold the
property in a cash sale for $6,140,000. From the proceeds, $5,058,226 was
paid to the third party mortgage holders in satisfaction of the first,
second and fourth mortgage loans. Additionally, $716,729 was paid in
satisfaction of the third mortgage note payable to Pinebrook Limited
Partnership, a separate joint venture consisting of the Partnership and the
affiliate. Total proceeds received from this transaction were $871,599, of
which $422,115 was the Partnership's share. See Note 4 of Notes to the
Financial Statements for additional information.
In October 1995, the Partnership made a distribution of $1,860,683 ($22.50
per Interest) to the holders of Limited Partnership Interests representing
a regular quarterly distribution of Net Cash Receipts of $7.50 per Interest
for the third quarter of 1995, a special distribution of $6.00 per
Interest from Net Cash Receipts reserves, and a special distribution of
$9.00 per Interest from Net Cash Proceeds reserves. The quarterly
distribution level increased compared to the second quarter of 1995 due to
improved operations at the Partnership's properties. Including the October
1995 distribution, Limited Partners have received cumulative cash
distributions of $82.50 per $1,000 Interest as well as certain tax
benefits. Of this amount, $53.50 has been from Net Cash Receipts and
$29.00 has been from Net Cash Proceeds. The General Partner expects to
continue quarterly distributions to Limited Partners. However, the level of
future distributions, if available, will depend on cash flow from the
Partnership's remaining properties and proceeds from future property sales,
as to both of which there can be no assurances.
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 can be expected to increase operating costs and
replacement costs and may lead to increased rental revenues and real estate
values.
<PAGE>
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(4) The Subscription Agreement as set forth as Exhibit 4.1 to Amendment No.
1 to Registrant's Registration Statement on Form S-11 dated November 29,
1984 (Registration No. 2-92777) and Form of Confirmation regarding
Interests in the Partnership as set forth as Exhibit 4.2 to the
Registrant's Report on Form 10-Q for the quarter ended June 30, 1995
(Commission File No. 0-14353) are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period
ending September 30, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the
quarter ended September 30, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR REALTY INVESTORS 85-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Thomas E. Meador
--------------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Partners-XVI, the General Partner
By: /s/Brian D. Parker
--------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Partners-XVI, the General
Partner
Date: November 13, 1995
-------------------------
<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 3699
<SECURITIES> 0
<RECEIVABLES> 17
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5726
<PP&E> 78321
<DEPRECIATION> 28471
<TOTAL-ASSETS> 56645
<CURRENT-LIABILITIES> 882
<BONDS> 56661
<COMMON> 0
0
0
<OTHER-SE> (1528)
<TOTAL-LIABILITY-AND-EQUITY> 56645
<SALES> 0
<TOTAL-REVENUES> 12507
<CGS> 0
<TOTAL-COSTS> 5038
<OTHER-EXPENSES> 1970
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3633
<INCOME-PRETAX> 1866
<INCOME-TAX> 0
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