FORM 10-Q
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 March 31, 1996
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
2355 Waukegan Road Suite A200
Bannockburn, Illinois 60015
(Address of principal executive (Zip Code)
offices)
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 .
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Balance Sheets
March 31, 1996 and December 31, 1995
1996
(Unaudited) 1995
Assets
Cash and cash equivalents $ 2,630,685 3,643,915
Accounts receivable, net of allowance for doubtful
accounts of $20,142 at March 31, 1996 and $18,321
at December 31, 1995 142,805 148,300
Mortgage notes receivable 1,643,021 1,649,953
Other 128,339 120,545
4,544,850 5,562,713
Mini-warehouse facilities:
Land 14,193,743 14,193,743
Buildings 47,484,623 47,445,774
Furniture, fixtures, and equipment 1,079,909 1,060,425
62,758,275 62,699,942
Less accumulated depreciation 19,758,100 19,271,250
Mini-warehouse facilities, net of accumulated
depreciation 43,000,175 43,428,692
$ 47,545,025 48,991,405
Liabilities and Partners' Capital
Accounts payable 29,800 1,503
Due to affiliates 162,471 825,200
Accrued real estate taxes 215,822 372,527
Other accrued liabilities 48,932 81,290
Security deposits 52,075 54,741
Deferred income 333,867 296,468
Total liabilities 842,967 1,631,729
Partners' capital:
Limited Partners (276,918 Limited Partnership
Interests issued and outstanding) 46,396,996 46,997,465
General Partners 305,062 362,211
46,702,058 47,359,676
$ 47,545,025 48,991,405
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Statements of Income
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
Income:
Rental $ 2,564,094 2,473,994
Interest on short-term investments 34,895 44,961
Interest from mortgage notes receivable 39,210 39,847
2,638,199 2,558,802
Expenses:
Property operating 719,796 706,872
Depreciation 486,850 492,124
Property management fees 155,954 75,004
General and administrative 175,871 147,897
1,538,471 1,421,897
Net income $ 1,099,728 1,136,905
Limited Partners' share of net income ($3.93 and
$4.06 per Interest for the three months ended
March 31, 1996 and 1995, respectively) $ 1,088,731 1,125,536
General Partners' share of net income 10,997 11,369
$ 1,099,728 1,136,905
Distribution to Limited Partners ($6.10 and $4.94
per Interest for the three months ended
March 31, 1996 and 1995, respectively) $ 1,689,200 1,367,977
Distribution to General Partners $ 68,146 -
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Statements of Cash Flows
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
Operating activities:
Net income $ 1,099,728 1,136,905
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 486,850 492,124
Net change in:
Net accounts receivable 5,495 23,924
Other assets (7,794) (6,308)
Accounts payable 28,297 -
Due to affiliates (662,729) (26,338)
Accrued real estate taxes (156,705) (94,839)
Other accrued liabilities (32,358) -
Security deposits (2,666) (6,343)
Deferred income 37,399 40,772
Net cash provided by operating
activities 795,517 1,559,897
Investing activities:
Additions to mini-warehouse facilities, net (58,333) (41,200)
Collection of principal payments on mortgage
notes receivable 6,932 6,301
Net cash used in investing activities (51,401) (34,899)
Financing activities:
Distribution to Limited Partners (1,689,200) (1,367,977)
Distribution to General Partners (68,146) -
Net cash used in financing activities (1,757,346) (1,367,977)
Net change in cash and cash equivalents (1,013,230) 157,021
Cash and cash equivalents at beginning of period 3,643,915 4,014,486
Cash and cash equivalents at end of period $ 2,630,685 4,171,507
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
three months ended March 31, 1996, 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 Colonial Storage 85, Inc., 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
March 31, 1996, property management fees of $1,991,890 were deferred.
Fees and expenses paid and payable by the Partnership to affiliates
for the quarter ended March 31, 1996 are:
Paid Payable
Property management fees (A) $ 361,349 $ 49,546
General and administrative expenses 79,747 39,015
Incentive management fees (B) 477,021 -
Property sales commissions (C) - 73,910
(A) Includes payment of the subordinated 3% management fee since
the Special Distribution of 10% was paid to Limited Partners
during the twelve month period ending March 31, 1996.
(B) Represents fees paid to the General Partners due to the
receipt by Limited Partners of the Special Distribution of
10%.
(C) These commissions payable to the General
Partners have been subordinated in accordance
with the Partnership Agreement.
3) Subsequent Event
In April 1996, the Partnership paid $1,730,738 to the Limited Partners
representing the quarterly distribution for the first quarter of 1996.
<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 in 1989, one facility in 1990 and two facilities in
1993. As of March 31, 1996 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 1995 for a more complete understanding of the
Partnership's financial position.
Operations
Summary of Operations
Increases in rental revenues were offset by increases in administrative expenses
and property management fees resulting in a decrease in net income during the
first quarter of 1996 as compared to the first quarter of 1995. 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.
1996 Compared to 1995
Due to an overall increase in rental rates at the Partnership's mini-warehouse
facilities, rental income increased during the first quarter of 1996 as compared
to the first quarter of 1995. Rental income increased significantly in the
Dallas/Fort Worth, Georgia and Carolina regions (seven, six and eight percent,
respectively) and decreased slightly in the East and West Texas regions (one and
three percent, respectively).
Interest income from short term investments decreased during the quarter
ended March 31, 1996 as compared to the same period in 1995 as a result of a
decrease in amounts available for investment.
In accordance with the Partnership Agreement, the full 6% management fee was
recognized for the three months ended March 31, 1996 due to the Limited Partners
receipt of distributions equal to 10% of Adjusted Original Capital during the
twelve month period ended March 31, 1996. The additional 3% fee was not earned
during the three months ended March 31, 1995. The recognition of the additional
management fee was the primary reason property management fees increased for the
quarter ended March 31, 1996 as compared to the same quarter in 1995.
Higher payroll and supply expenses resulted in an increase in general and
administrative expenses for the first quarter of 1996 as compared to the
first quarter of 1995.
Liquidity and Capital Resources
The cash position of the Partnership decreased approximately $1,013,000 from
December 31, 1995, to March 31, 1996. The Partnership's cash flow provided by
operating activities of approximately $796,000 in the first quarter of 1996 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 were partially offset by
administrative expenses and the payment of additional property management fees
and Partnership incentive management fees for 1995, as discussed below. Cash
flow of approximately $58,000 was used in investing activities to make capital
improvements to the properties, which included door and roofing expenditures,
and in financing activities to provide distributions to the Limited and General
Partners of approximately $1,757,000.
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. From the
inception of the offering through March 31, 1996, the General Partner's share
of Net Cash Receipts totaled approximately $4,293,000 of which $545,167 was
paid to the General Partners in February, 1996 ($477,021 of incentive
management fees and $68,146 as its distributive share of Net Cash Receipts).
The General Partners are entitled to receive subordinated amounts only from
distributed Net Cash Proceeds.
The General Partners' current strategy is to continue to operate the
Partnership's properties in a manner to maximize cash flow and to provide the
Limited Partners with regular quarterly distributions. A further objective is
to maximize the price at which the properties may ultimately be sold.
Occasionally, the General Partners receive unsolicited inquiries to purchase the
Partnership's properties, and currently there has been strong interest from
institutional purchasers of mini-warehouse facilities. The General Partners
will continue to evaluate all offers and explore other alternatives in order to
achieve the objectives and maximize return to the Limited Partners.
In April 1996, the Partnership paid $1,730,738 ($6.25 per Interest) to the
Limited Partners representing the quarterly distribution for the first
quarter of 1996. Including the April 1996 distribution, the Partnership has
distributed $194.62 per $250 Interest. 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 $6.10 per
Interest for the fourth quarter of 1995 to $6.25 per Interest for the first
quarter of 1996 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) Form of Subscription Agreement previously filed as
Exhibit 4.1 to Amendment No. 1 to the Registrant's
Registration Statement on Form S-11 dated May 14, 1985
and to the Registrant's Registration Statement on Form
S-11 dated January 29, 1985 (Registration No. 2-95752,
and No. 33-2977, 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, 1992 (Commission File No.
0-14340) are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the
quarter ended March 31, 1996 is attached hereto.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter
ended March 31, 1996.
<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 Executive Officer
(Principal Executive Officer) of Balcor
Storage Partners-85, a General Partner
By: /s/ Brian D. Parker
Brian D. Parker,
Senior 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: May 15, 1996
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<PERIOD-END> MAR-31-1996
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0
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<OTHER-SE> 46702
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