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, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number: 0-14340
Balcor/Colonial Storage Income Fund - 85
(Exact name of registrant as specified in its charter)
Illinois 36-3338930
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
Balcor Plaza
4849 Golf Road
Skokie, Illinois 60077
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (708) 677-2900
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 .
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Balance Sheets
September 30, 1994 and December 31, 1993
1994
(Unaudited) 1993
Assets
Cash and cash equivalents $ 3,896,279 2,834,883
Accounts receivable, net of allowance for
doubtful accounts of $20,352 at September 30,
1994 and $18,243 at December 31, 1993 124,641 128,857
Mortgage notes receivable 1,682,237 1,913,987
Other 199,856 177,326
5,903,013 5,055,053
Mini-warehouse facilities, at cost:
Land 14,193,743 14,193,743
Buildings 46,693,330 46,265,292
Furniture, fixtures and equipment 936,722 892,230
61,823,795 61,351,265
Less accumulated depreciation 16,769,555 15,300,556
Mini-warehouse facilities, net of accumulated
depreciation 45,054,240 46,050,709
$50,957,253 51,105,762
Liabilities and Partners' Capital
Due to affiliates 145,163 115,291
Accrued real estate taxes 400,778 309,320
Other accrued liabilities 67,485 57,364
Security deposits 85,047 131,156
Deferred income 304,890 301,621
Total liabilities 1,003,363 914,752
Partners' capital (276,918 Limited Partnership
Interests issued and outstanding) 49,953,890 50,191,010
$50,957,253 51,105,762
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Statements of Income
For the Three Months and Nine Months Ended September 30, 1994 and 1993
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Income:
Rental $ 2,592,783 2,372,293 7,536,333 6,897,508
Interest on short-term
investments 43,602 18,589 81,001 45,968
Interest from mortgage
notes receivable 40,142 39,980 127,208 99,133
2,676,527 2,430,862 7,744,542 7,042,609
Expenses:
Property operating 703,324 706,268 2,081,155 2,163,179
Depreciation 492,214 485,334 1,468,999 1,455,432
Property management fees 74,780 70,704 222,760 207,161
General and administrative 120,743 135,125 406,663 378,146
1,391,061 1,397,431 4,179,577 4,203,918
Income from operations 1,285,466 1,033,431 3,564,965 2,838,691
Loss on sale of property
and equipment - 40,841 - 40,841
Net income $ 1,285,466 992,590 3,564,965 2,797,850
Limited Partners' share
of net income ($4.60
and $3.55 per Interest
for the three months
ended September 30,
1994 and 1993,
respectively, and
$12.74 and $10.01 per
Interest for the nine
months ended
September 30, 1994 and
1993, respectively) $ 1,272,611 982,664 3,529,316 2,769,871
General Partners' share
of net income 12,855 9,926 35,649 27,979
$ 1,285,466 992,590 3,564,965 2,797,850
Distributions to Limited
Partners ($4.63 and
$4.38 per Interest for
the three months ended
September 30, 1994 and
1993, respectively,
and $13.73 and $13.06
per Interest for the
nine months ended
September 30, 1994 and
1993, respectively) $ 1,282,131 1,212,900 3,802,085 3,616,547
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Statements of Cash Flows
For The Nine Months Ended September 30, 1994 and 1993
(Unaudited)
1994 1993
Operating activities:
Net income $ 3,564,965 2,797,850
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on sale of property and equipment - 40,841
Depreciation 1,468,999 1,455,432
Net change in:
Net accounts receivable 4,216 16,021
Other assets (22,530) (36,611)
Accounts payable - (67,623)
Due to affiliates 29,872 44,853
Accrued real estate taxes 91,458 80,602
Other accrued liabilities 10,121 2,699
Security deposits (46,109) 7,336
Deferred income 3,269 49,687
Net cash provided by operating activities 5,104,261 4,391,087
Investing activities:
Additions to mini-warehouse facilities, net (472,530) (432,218)
Proceeds from sale of property - 449,999
Payment of selling costs - (45,734)
Collection of principal payments on mortgage
notes receivable 231,750 12,226
Net cash used in investing activities (240,780) (15,727)
Financing activities:
Distributions to Limited Partners (3,802,085) (3,616,547)
Net cash used in financing activities (3,802,085) (3,616,547)
Net change in cash and cash equivalents 1,061,396 758,813
Cash and cash equivalents at beginning of year 2,834,883 2,427,287
Cash and cash equivalents at end of period $ 3,896,279 3,186,100
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
1) Summary of Significant 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 ended September 30, 1994, and all such adjustments are of
a normal and recurring nature.
2) Transactions with Affiliates
The Partnership has an agreement with Colonial Storage Management 85,
Inc., an affiliate of a General Partner, to supervise and direct the
business and affairs associated with the mini-warehouse facilities for
a fee of 6% of the gross revenues of the facilities. One-half of this
property management fee is subordinated to receipt by the Limited
Partners of a Special Distribution of 8% during the first twelve-
month period after termination of the offering, 9% during the second
twelve-month period, and 10% during each 12-month period thereafter.
Any deferred portion of the property management fee will be paid only
from distributed Net Cash Proceeds. As of September 30, 1994,
property management fees of $1,920,979 were deferred.
Fees and expenses paid and payable by the Partnership to affiliates
for the quarter and nine months ended September 30, 1994, are:
Paid Payable
Quarter Nine Months
Property management fees $ 75,911 $ 221,921 $ 24,327
General and administrative
expenses 105,094 232,224 46,926
Property sales commissions (A) - - 73,910
(A) These commissions are payable to the General
Partners and have been subordinated in
accordance with the Partnership Agreement.
3) Subsequent Event
In October 1994, the Partnership paid $1,367,975 to the Limited
Partners, representing the quarterly distribution for the third
quarter of 1994.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor/Colonial Storage Income Fund - 85 (the "Partnership") is a limited
partnership formed in September 1983. The principal purpose of the
Partnership is to acquire, own, maintain, operate, lease and hold for
capital appreciation and current income existing mini-warehouse facilities
offering storage space for business and personal use. The Partnership
raised $69,229,500 through the sale of Limited Partnership Interests and
utilized these proceeds to acquire 69 mini-warehouse facilities from
affiliates in 1985 and 4 mini-warehouse facilities from non-affiliated
entities in 1986. The Partnership sold one mini-warehouse facility each in
September 1989 and January 1990 and two mini-warehouse facilities in July
1993. As of September 30, 1994 the Partnership continues to operate 69
mini-warehouse facilities.
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
1993 for a more complete understanding of the Partnership's financial
position.
Operations
Summary of Operations
Increased rental revenues resulting from an ongoing capital improvement
program and improved market conditions in cities where many of the
Partnership's properties are located were the primary reasons for the
increase in the net income generated by the Partnership during the third
quarter and nine months ended September 30, 1994 as compared to the third
quarter and nine months ended September 30, 1993. No material events
occurred during these periods which significantly impacted the net income
of the Partnership. Further discussion of the Partnership's operations is
summarized below.
1994 Compared to 1993
Due to increases in occupancy levels and rental rates at certain of the
mini-warehouse facilities, particularly those located in Georgia, the
Carolinas and the southwest regions, rental income and, correspondingly,
property management fees increased for the third quarter and nine months
ended September 30, 1994 as compared to the third quarter and nine months
ended September 30, 1993.
Interest income on short-term investments increased due to an increase in
interest rates and funds available for investment.
Interest income from mortgage notes receivable increased from 1993 to 1994
primarily due to interest payments received on the mortgage notes which
were received by the Partnership in connection with the 1993 sale of two
mini-warehouse properties.
Lower maintenance costs and real estate taxes resulted in a decrease in
property operating expenses for the nine months ended September 30, 1994 as
compared to the same period in 1993. Maintenance expenses decreased due to
a decrease in general maintenance during the first nine months of 1994.
Real estate tax expense decreased due to adjustments in property values at
certain of the Partnership's mini-warehouse facilities during 1993.
Higher payroll costs resulted in an increase in general and administrative
expenses for the nine months ended September 30, 1994 as compared to the
same period in 1993. Lower printing costs partially offset this increase
and caused a decrease in administrative expenses for the quarter ended
September 30, 1994 as compared to the same period in 1993.
In July 1993 the Partnership sold two mini-warehouse facilities located in
Albuquerque, New Mexico and recognized a loss on sale of property and
equipment during the quarter and nine months ended September 30, 1993.
Liquidity and Capital Resources
The cash or near cash position of the Partnership increased from
December 31, 1993 to September 30, 1994. The Partnership's cash flow
provided by operating activities in the first nine months of 1994 was
generated primarily by the operations of the mini-warehouse properties,
interest income received on the Partnership's short term investments and
interest income received on mortgage notes receivable, which was partially
offset by administrative expenses. This cash flow was used in investing
activities to make capital improvements to the properties, which included
painting, roofing and paving expenditures, and in financing activities to
provide distributions to the Limited Partners. The Partnership's cash
position was further increased by repayment of one of the mortgage notes
receivable.
Pursuant to the Partnership Agreement, the General Partners are entitled to
8% of Net Cash Receipts available for distribution, which is subordinated
to the receipt by Limited Partners of specified distribution levels
following the termination of the offering. From the inception of the
offering through September 30, 1994, the General Partners' share of Net
Cash Receipts totaled approximately $3,656,000, none of which has been
paid. The General Partners are entitled to receive such subordinated
amounts only from distributed Net Cash Proceeds after certain subordination
levels are met.
In October 1994, the Partnership paid $1,367,975 ($4.94 per Interest) to
the Limited Partners, representing the quarterly distribution for the third
quarter of 1994. This distribution amount is less than the full Special
Distribution (as defined in the Partnership Agreement) of ten percent per
annum. As stated in the Partnership Agreement, any deficiency in the
Special Distribution is payable from distributed Net Cash Proceeds. The
General Partners believe the cash flow generated from property operations
should enable the Partnership to continue making quarterly distributions to
Limited Partners. However, the level of future cash distributions to
Limited Partners will be dependent upon the amount of cash flow generated
by the Partnership's properties, as to which there can be no assurance.
Quarterly distributions increased from $4.63 per Interest for the first and
second quarters of 1994 to $4.94 per Interest for the third quarter of 1994
due to improved operating results at several of the Partnership's mini-
warehouse facilities. The General Partners intend to retain on behalf of
the Partnership cash reserves deemed adequate to meet working capital
requirements as they may arise.
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/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(4) Forms of Subscription Agreement previously filed as
Exhibit 4.1 to the Forms S-11 dated May 14, 1985 and
September 23, 1985 (Registration No. 2-95752 and
No. 33-357, respectively) 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, 1993 (Commission File
No. 0-14340) are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the
nine month period ending September 30, 1994 is
attached hereto.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter
ended September 30, 1994.
<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/Colonial Storage Income Fund - 85
By: /s/ Thomas E. Meador
Thomas E. Meador,
President and Chief Operating
Officer (Principal Operating
Officer) of Balcor Storage
Partners-85, a General Partner
By: /s/ Allan Wood
Allan Wood,
Executive Vice President and
Chief Accounting and Financial
Officer (Principal Accounting
and Financial Officer) of Balcor
Storage Partners-85, a General
Partner
By: /s/ James Pruett
James Pruett,
President and Director of
Colonial Storage 85, Inc., a
General Partner
By: /s/ James N. Danford
James N. Danford,
Secretary/Treasurer (Principal
Financial and Accounting
Officer) of Colonial Storage 85,
Inc., a General Partner
Date: November 11, 1994
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<PERIOD-END> SEP-30-1994
<CASH> 3896
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<RECEIVABLES> 1807
<ALLOWANCES> 0
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<CURRENT-ASSETS> 5903
<PP&E> 61824
<DEPRECIATION> 16770
<TOTAL-ASSETS> 50957
<CURRENT-LIABILITIES> 1003
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0
0
<OTHER-SE> 49954
<TOTAL-LIABILITY-AND-EQUITY> 50957
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<TOTAL-REVENUES> 7745
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<OTHER-EXPENSES> 1876
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