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 March 31, 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
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(Exact name of registrant as specified in its charter)
Illinois 36-3244978
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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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
March 31, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
-------------- --------------
Cash and cash equivalents $ 6,530,671 $ 6,475,393
Accounts and accrued
interest receivable 443,588 28,827
Other assets - principally
escrow deposits 1,168,742 1,140,420
Deferred expenses, net of accumulated
amortization of $247,905 in 1995
and $213,273 in 1994 938,521 973,153
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9,081,522 8,617,793
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Investment in real estate:
Land 12,380,326 12,380,326
Buildings and improvements 65,940,832 65,940,832
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78,321,158 78,321,158
Less accumulated depreciation 27,508,297 27,027,028
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Investment in real estate, net of
accumulated depreciation 50,812,861 51,294,130
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$ 59,894,383 $ 59,911,923
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 226,343 $ 133,743
Due to affiliates 124,098 75,413
Accrued liabilities, principally real
estate taxes 289,341 366,628
Security deposits 273,212 288,084
Losses in excess of investments in
joint ventures with affiliates 276,438 553,742
Mortgage notes payable 56,679,524 57,381,930
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Total liabilities 57,868,956 58,799,540
Partners' capital (82,697 Limited
Partnership Interests issued and
outstanding) 2,025,427 1,112,383
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$ 59,894,383 $ 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 quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental and service $ 3,798,276 $ 3,648,987
Interest on short-term investments 104,326 30,665
Participation in income (losses) of
joint ventures with affiliates 733,993 (21,466)
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Total income 4,636,595 3,658,186
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Expenses:
Interest on mortgage notes payable 1,241,669 1,207,603
Depreciation 481,269 481,269
Amortization of deferred expenses 34,632 33,311
Property operating 1,024,077 1,129,448
Real estate taxes 250,456 239,742
Property management fees 186,232 179,481
Administrative 133,529 140,954
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Total expenses 3,351,864 3,411,808
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Income before extraordinary item 1,284,731 246,378
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Extraordinary item:
Gain on forgiveness of debt 41,798
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Net income $ 1,326,529 $ 246,378
============== ==============
Income before extraordinary item
allocated to General Partner $ 12,847 $ 2,464
============== ==============
Income before extraordinary item
allocated to Limited Partners $ 1,271,884 $ 243,914
============== ==============
Income before extraordinary item
per Limited Partnership Interest
(82,697 issued and outstanding) $ 15.38 $ 2.95
============== ==============
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
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<PAGE>
Net income allocated to
General Partner $ 13,265 $ 2,464
============== ==============
Net income allocated to
Limited Partners $ 1,313,264 $ 243,914
============== ==============
Net income per Limited Partnership
Interest (82,697 issued
and outstanding) $ 15.88 $ 2.95
============== ==============
Distribution to Limited Partners $ 413,485 None
============== ==============
Distribution per Limited
Partner Interest $ 5.00 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 quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 1,326,529 $ 246,378
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 (733,993) 21,466
Depreciation of properties 481,269 481,269
Amortization of deferred expense 34,632 33,311
Net change in:
Accounts and accrued interest
receivable (885) (285,650)
Other assets (60,572) 603,570
Accounts payable 92,600 (17,774)
Due to affiliates 48,685 60,619
Accrued liabilities (77,287) (82,651)
Security deposits (14,872) 7,419
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Net cash provided by
operating activities 1,054,308 1,067,957
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Investing activities:
Capital contribution to joint
venture with affiliate (11,464) (5,445)
Distributions from joint ventures
with affiliates 54,277 24,102
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Net cash provided by
investing activities 42,813 18,657
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Financing activities:
Distribution to Limited Partners (413,485)
Principal payments on
mortgage notes payable (660,608) (1,832,293)
Refund of improvement escrow 32,250
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Net cash used in
financing activities (1,041,843) (1,832,293)
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<PAGE>
Net change in cash and
cash equivalents 55,278 (745,679)
Cash and cash equivalents at
beginning of period 6,475,393 3,129,791
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Cash and cash equivalents
at end of period $ 6,530,671 $ 2,384,112
============== ==============
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 quarter ended March 31,
1995, and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the quarter ended March 31, 1995 and 1994, the Partnership incurred
interest expense on mortgage notes payable to unaffiliated parties of
$1,241,669 and $1,207,603 and paid interest expense of $1,241,669 and
$1,207,603 respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1995 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost None $124,098
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 the
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. This amount, net of its share of the first quarter operating deficit, is
included in accounts receivable in the financial statements at March 31, 1995.
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. Subsequent Event:
In April 1995, the Partnership made a distribution of $413,485 ($5.00 per
Interest) to the holders of Limited Partnership Interests for the first quarter
of 1995.
<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
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Summary of Operations
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The Pinebrook Apartments, which is 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
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Increased rental and/or occupancy rates at five of the Partnership's seven
remaining properties and cable access fees received at two properties caused an
increase in rental and service income for the quarter ended March 31, 1995 as
compared to the same period in 1994.
The increase in cash flow from the Partnership's properties and the net
proceeds received in connection with the refinancing of the underlying mortgage
loan on Heather Ridge Apartments in 1994 caused the Partnership's cash balances
to increase. This, together with higher interest rates, resulted in an increase
in interest income on short-term investments during the quarter ended March 31,
1995 when compared to the same period in 1994.
<PAGE>
Property operating expense decreased during the quarter ended March 31, 1995 as
compared to the same period in 1994 primarily as a result of a decrease in
carpet replacement expenses at six of the Partnership's seven properties.
Pinebrook Apartments, in which the Partnership held a minority joint venture
interest, was sold during February 1995. As a result of the gain recognized in
connection with the sale, the Partnership recognized income from participation
in joint ventures with affiliates during the quarter ended March 31, 1995 as
compared to a loss during the same period in 1994.
During 1995, the Partnership recognized an extraordinary gain on forgiveness of
debt of $41,798 in connection with the settlement reached with the seller of
Templeton Park Apartments.
Liquidity and Capital Resources
- - -------------------------------
The cash position of the Partnership remained relatively unchanged as of March
31, 1995 as compared to December 31, 1994. The Partnership's cash flow provided
by operating activities was generated primarily from the Partnership's
properties, and was partially offset by the payment of administrative expenses.
The Partnership received cash flow from investing activities which consisted of
a net distribution from its joint ventures with affiliates. Cash provided by
operating and investing activities was used to fund financing activities, which
consisted of principal payments on mortgage notes payable and distributions to
the Limited Partners.
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. 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 the quarter ended
March 31, 1995 and 1994, all seven of the Partnership's properties generated
positive cash flow. Of the remaining two properties in which the Partnership
holds minority joint venture interests, the North Hill Apartments generated
positive cash flow during the quarter ended March 31, 1995 and 1994. The
Seabrook Apartments generated a marginal cash flow deficit during the quarter
ended March 31, 1995 as compared to positive cash flow for the same period in
1994 primarily due to an increase in the interest rate on its mortgage note
payable.
While the cash flow of certain of the Partnership's remaining properties has
improved, the General Partner continues to pursue a number of actions aimed at
further improving the cash flow of the Partnership's properties including
refinancing of mortgage loans, improving property operating performance, and
seeking rent increases where market conditions allow. As of March 31, 1995, the
occupancy rates of the Partnership's properties ranged from 91% to 97%. Despite
recent improvements 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.
<PAGE>
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. The $7,787,000 Boulder Springs
mortgage loan matures in June 1995 and the Partnership is currently pursuing a
refinancing of this loan. In certain instances it may be difficult for the
Partnership to refinance a loan secured by a property in an amount sufficient
to retire in full the current mortgage financing with respect to the property.
In the event negotiations with the existing lender for a loan modification or
with new lenders for a refinancing are unsuccessful, the Partnership may sell
the collateral property or other properties to satisfy an obligation or may
relinquish title to the collateral property in satisfaction of the outstanding
mortgage loan balance.
The Pinebrook Apartments was owned by Pinebrook Investors, a joint venture
consisting of the Partnership and an affiliate. In February 1995, Pinebrook
Investors sold the property in a cash sale for $6,140,000. From the proceeds,
Pinebrook investors paid $5,058,226 to the third party mortgage holders in
satisfaction of the first, second and fourth mortgage loans. Additionally,
Pinebrook Investors paid $716,729 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 of Financial Statements for additional information.
In April 1995, the Partnership made a distribution of $413,485 ($5.00 per
Interest) to the holders of Limited Partnership Interests for the first quarter
of 1995. To date, investors have received Net Cash Receipt distributions of
$15.00 per $1,000 Interest as well as certain tax benefits. 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, the successful refinancing of certain
mortgage loans and proceeds from future property sales, as to all 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
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(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, 1992 (Commission File No. 0-14353) are
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the three month period
ending March 31, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 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 Parker
--------------------------------
Brian Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Partners-XVI, the General
Partner
Date: May 12, 1995
-------------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 6531
<SECURITIES> 0
<RECEIVABLES> 444
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8143
<PP&E> 78321
<DEPRECIATION> 27508
<TOTAL-ASSETS> 59894
<CURRENT-LIABILITIES> 913
<BONDS> 56680
<COMMON> 0
0
0
<OTHER-SE> 2025
<TOTAL-LIABILITY-AND-EQUITY> 59894
<SALES> 0
<TOTAL-REVENUES> 4637
<CGS> 0
<TOTAL-COSTS> 1461
<OTHER-EXPENSES> 649
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1242
<INCOME-PRETAX> 1285
<INCOME-TAX> 0
<INCOME-CONTINUING> 1285
<DISCONTINUED> 0
<EXTRAORDINARY> 42
<CHANGES> 0
<NET-INCOME> 1327
<EPS-PRIMARY> 15.88
<EPS-DILUTED> 15.88
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