UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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
incorporation or organization) Identification No.)
Balcor Plaza
2355 Waukegan Road Suite A200 Bannockburn, Illinois 60015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 267-1600
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act: Limited
Partnership Interests
Title of class
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
{PAGE}
PART I
Item 1. Business
Balcor/Colonial Storage Income Fund - 85 (the "Registrant") is a limited
partnership formed in September 1983 under the laws of the State of Illinois,
which raised $69,229,500 from sales of Limited Partnership Interests. The
Registrant's operations consist exclusively of investment in and operation of
income-producing mini-warehouse facilities, and all financial information
included in this report relates to that industry segment.
The principal purpose of the Registrant 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
Registrant utilized the net offering proceeds to acquire from affiliates of a
General Partner sixty-nine mini-warehouse facilities in 1985. Additionally, the
Registrant acquired from non-affiliated entities four mini-warehouse facilities
in 1986. The Registrant sold one mini-warehouse facility each in 1989 and 1990
and two facilities in 1993.
The Partnership Agreement provides that the proceeds of any sale, financing, or
refinancing will not be reinvested in new acquisitions, except that net proceeds
may be used to purchase or finance improvements or additions to the Registrant's
properties.
The Registrant received notice of two unsolicited offers for the purchase of
limited partnership interests (tender offers) in January 1996. The tender
offers were made by Everest Storage Investors, LLC (Everest) and Public Storage,
Inc. (Public Storage). Each stated that their primary motive in making the
offer was to make a profit from the purchase of the interests. The tender offer
by Everest expired on February 12, 1996 and Everest acquired 4.9% of the
Registrant's total interests outstanding. The tender offer by Public Storage
expired on March 12, 1996 and Public Storage acquired 6.84% of the Registrant's
total interests outstanding. The Registrant incurred administrative costs in
responding to the tender offers and may incur additional costs if additional
tender offers are made in the future. The General Partners cannot predict with
any certainty what the impact of any future tender offers will have on the
operations or management of the Registrant.
The General Partners' current strategy is to continue to operate the
Registrant'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
Registrant'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.
The Registrant, by virtue of its ownership of real estate, is subject to federal
and state laws and regulations covering various environmental issues.
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental issues and to conduct tests for
environmental contamination as appropriate. The General Partners are not aware
of any potential liability due to environmental issues or conditions that would
be material to the Registrant.
The officers, directors, and employees of Balcor Storage Partners-85 and
Colonial Storage 85, Inc., the General Partners of the Registrant, and their
affiliates perform certain services for the Registrant. The Registrant
currently has 29 full-time and 72 part-time employees engaged in its operations.
{PAGE}
Item 2. Properties
As of December 31, 1995, the Registrant owned the properties described below.
Net
Rentable
Land Area No. of
Area (Square Rentable
Location (Acres) Feet) Spaces
3233 East Highway 80
Odessa, Texas 1.3 22,450 156
2306 North Collins Boulevard
Arlington, Texas 1.7 26,098 248
3107 South Lake Drive
Texarkana, Texas 1.1 19,230 152
6715 Wolflin Road
Amarillo, Texas 1.6 21,080 217
7800 North Broadway
Oklahoma City, Oklahoma 2.4 35,880 260
1604 Camp Lane
Albany, Georgia 1.9 32,942 299
1005 West Cotton
Longview, Texas 2.2 24,002 208
6046 Financial Drive
Norcross, Georgia 2.2 34,708 285
1320 Norwood Drive
Bedford, Texas 1.8 29,220 251
5311 Apex Highway
Durham, North Carolina 3.0 23,000 252
218 Eisenhower Drive
Savannah, Georgia 1.5 21,716 206
132 Slaton Highway
Lubbock, Texas 1.9 16,840 113
2960 South Cobb Drive
Smyrna, Georgia 1.8 28,892 255
3513 Highway 45 North
Meridian, Mississippi 2.0 24,980 186
3194 South Campbell Avenue
Springfield, Missouri 1.7 25,360 233
1440 North Hairston Road
Stone Mountain, Georgia 2.3 30,117 270
3472 Hillsboro Road
Durham, North Carolina 1.9 31,600 315
4615 West Beryl Road
Raleigh, North Carolina 1.7 28,750 295
2826 South Clack Street
Abilene, Texas 2.4 32,038 266
1301 South Stemmons
Lewisville, Texas 1.2 21,900 162
2316 Highway 19 North
Meridian, Mississippi 2.3 27,880 215
3016 South Cooper
Arlington, Texas 1.5 24,912 193
2215 West Southwest Loop 223
Tyler, Texas 2.5 28,301 248
2000 Country Club Drive
Carrollton, Texas 2.0 35,379 253
2331 South Collins Boulevard
Arlington, Texas 2.0 31,396 276
2990 Pio Nono Avenue
Macon, Georgia 1.7 26,998 220
5513 East Lancaster
Fort Worth, Texas 1.3 22,104 210
5121 North Street
Nacogdoches, Texas 2.0 17,483 147
4917 California Parkway, S.E.
Fort Worth, Texas 1.7 27,132 247
1881 Gordon Highway
Augusta, Georgia 1.6 22,464 229
3208 East Park Row
Arlington, Texas 2.1 35,505 319
5502 Chapel Hill Boulevard
Chapel Hill, North Carolina 1.7 26,800 260
3654 West Pioneer Parkway
Arlington, Texas 2.3 34,176 253
1311 Northwest Loop 281
Longview, Texas 2.0 24,940 200
3125 Cherry Street North
Winston-Salem, North Carolina 1.3 21,500 258
1010 Holiday Hill Drive
North Midland, Texas 2.6 42,578 354
95 Green Street
Warner Robins, Georgia 1.2 19,940 192
2115 Silas Creek Parkway
Winston-Salem, North Carolina 1.7 25,350 305
3120 Knickerbocker Road
San Angelo, Texas 1.8 19,425 151
2302 Parkview Drive
San Angelo, Texas 1.1 19,575 180
8457 Roswell Road
Dunwoody, Georgia 3.9 60,240 466
5717 Will Ruth Avenue
El Paso, Texas 2.0 33,056 260
1513 Denman Street
Lufkin, Texas 1.5 14,362 119
9303 Abercorn Extension
Savannah, Georgia 3.0 34,080 277
1850 North Clack Street
Abilene, Texas 1.2 17,280 99
7012 Glenwood
Raleigh, North Carolina 1.5 25,200 192
3730 West Wendover Avenue
Greensboro, North Carolina 1.7 30,600 289
2305 East Lohman Avenue
Las Cruces, New Mexico 1.3 17,380 175
4000 I-40 East
Amarillo, Texas 1.6 21,860 218
4701 Osborne Drive
El Paso, Texas 1.3 18,900 173
3229 Highway 80
Mesquite, Texas 2.1 31,120 211
1510 West 7th Street
Clovis, New Mexico 1.0 13,640 124
914 N.E. 8th Street
Grand Prairie, Texas 1.8 27,940 206
7469 Tara Boulevard
Jonesboro, Georgia 1.8 29,082 221
871 North Forest
Amarillo, Texas 2.5 23,379 200
5808 Highway 271 South
Fort Smith, Arkansas 1.1 14,680 123
5604 Tinker Diagonal
Midwest City, Oklahoma 1.6 27,901 278
3751 Longmire Way
Doraville, Georgia 2.1 29,780 300
818 South Clack Street
Abilene, Texas 1.5 16,340 165
8400 Canyon Drive
Amarillo, Texas 2.2 17,570 157
3121 Washington Road
Augusta, Georgia 1.4 28,138 255
4011 Midland Boulevard
Fort Smith, Arkansas 1.9 26,580 174
4141 Snapfinger Woods Drive
Decatur, Georgia 2.7 36,580 336
1808 Hampton Road
Texarkana, Texas 2.8 28,621 247
4155 Milgen Road
Columbus, Georgia 1.5 24,624 215
426 South College Drive
Wilmington, North Carolina 2.3 28,131 290
1412 Poinsett Highway
Greenville, South Carolina 1.6 19,300 200
2815 White Horse Road
Greenville, South Carolina 2.6 31,500 309
1515 Mt. Zion Road
Morrow, Georgia 5.0 64,539 666
In the opinion of the General Partners, the Registrant has provided for
adequate insurance coverage for its real estate investment properties.
Item 3. Legal Proceedings
The Registrant is not subject to any material pending legal proceedings,
nor were any such proceedings terminated during the fourth quarter of 1995.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Limited Partners of the
Registrant during 1995.
{PAGE}
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
There has not been an established public market for Limited Partnership
Interests, and it is not anticipated that one will develop. For information
regarding previous distributions, see the Statements of Partners' Capital, page
F-5, and Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources, below.
As of December 31, 1995, the number of record holders of Limited
Partnership Interests of the Registrant was 7,733.
Item 6. Selected Financial Data
Year Ended December 31
1995 1994 1993 1992 1991
Rental income $ 10,316,881 10,067,226 9,298,505 8,600,074 8,117,059
Interest income $ 330,915 293,869 213,018 194,020 266,973
Net income $ 4,124,388 4,816,067 4,089,522 3,443,706 3,224,478
Net income per
Limited
Partnership
Interest $ 14.74 17.22 14.62 12.31 11.53
Taxable income $ 4,693,882 4,893,600 3,930,321 3,208,375 2,969,489
Taxable income
per Limited
Partnership
Interest $ 16.78 17.50 14.05 11.47 10.62
Cash and
cash
equivalents $ 3,643,915 4,014,486 2,834,883 2,427,287 2,328,126
Total mini-
warehouse
properties, net
of accumulated
depreciation $ 43,428,692 44,809,932 46,050,709 48,492,489 49,807,181
Total assets $ 48,991,405 50,764,405 51,105,762 52,366,414 53,577,746
Distributions to
Limited Partners $ 6,601,725 5,170,064 5,305,745 4,715,919 4,641,178
Distributions per
Limited
Partnership
Interest $ 23.84 18.67 19.16 17.03 16.76
Properties
owned on
December 31 69 69 69 71 71
{PAGE}
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Summary of Operations
Increased Property management fees and Partnership incentive management fees
earned by the General Partners in 1995 were the primary reasons net income
decreased during 1995 as compared to 1994. Increased rental revenues resulting
from substantially improved market conditions in cities where many of
Balcor/Colonial Storage Income Fund-85's (the "Partnership") properties are
located was the primary reason for the increases in net income generated by the
Partnership during 1994 and 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.
Operations
1995 Compared to 1994
Due to increases in rental rates at certain of the Partnership's mini-warehouse
facilities, particularly in the Georgia region of the United States, rental
income increased from 1994 to 1995. This increase was partially offset by a
decrease in occupancies and, correspondingly, revenues, in the West Texas
region.
Interest income on short-term investments increased from 1994 to 1995 due
to an increase in average balances available for investment as well as an
increase in rates during the first half of 1995.
Property operating expenses increased from 1994 to 1995 due to an increase in
maintenance and repairs and real estate taxes. Maintenance and repairs
increased due to an increase in painting and paving expenditures. Real estate
taxes increased due to an increase in values and rates at certain of the
Partnership's properties.
The Limited Partners received distributions equal to 10% of Adjusted Original
Capital for 1995 and in accordance with the Partnership Agreement, the full 6%
management fee was recognized for the nine months ended December 31, 1995 (see
note 3 of Notes to Financial Statements for additional information). The
recognition of the additional management fee for the period stated was the
primary reason property management fees increased for 1995 as compared to 1994.
Incentive management fees of $477,021 were earned by the General Partners in
1995 due to the receipt by Limited Partners of the above mentioned
distributions. See note 3 of Notes to Financial Statements for additional
information.
Increased accounting and asset management costs resulted in an increase in
general and administrative expenses during 1995 as compared to 1994.
1994 Compared to 1993
Due to increases in rental rates at certain of the Partnership's mini-warehouse
facilities, particularly in the Georgia and mid-Atlantic regions of the United
States, rental income and, correspondingly, property management fees increased
from 1993 to 1994.
Interest income from mortgage notes receivable increased from 1993 to 1994 due
to interest payments on the first mortgage notes which were received by the
Partnership in connection with the sale of two mini-warehouse properties in July
1993. This increase was partially offset by the retirement of one note in April
1994.
Interest income on short-term investments increased from 1993 to 1994 due to an
increase in average balances available for investment as well as an increase in
rates.
Increased accounting and asset management costs as well as supplies expenses
resulted in an increase in general and administrative expenses during 1994 as
compared to 1993.
Liquidity and Capital Resources
The cash position of the Partnership decreased from December 31, 1994, to
December 31, 1995 as distributions to Limited Partners and capital expenditures
exceeded cash generated from operations and from mortgage notes receivable. The
Partnership's cash flow provided by operating activities in 1995 was generated
primarily by the operations of the mini-warehouse properties and interest income
earned on the Partnership's short-term investments and 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.
Accounts receivable net of the related allowance for doubtful accounts
increased from December 31, 1994 to December 31, 1995 due to the level and
timing of collection efforts. The timing of collection efforts are determined
by individual state law. There have been no changes in the credit terms
extended to the Partnership's customers nor in the method used to allow for
doubtful accounts.
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 (see note 1(c) of
Notes to Financial Statements for additional information). The General Partners
received $545,167 in February, 1996($477,021 as its incentive management fee and
$68,146 as its distributive share of Net Cash Receipts). From the inception of
the offering through December 31, 1995, the General Partners' share of Net Cash
Receipts totaled approximately $4,293,000, $3,748,000 of which is subordinated.
The General Partners are entitled to receive subordinated amounts only from
distributed Net Cash Proceeds.
In January 1996, the Partnership paid $1,689,200 ($6.10 per interest) to the
Limited Partners representing the quarterly distribution for the fourth quarter
of 1995. 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 per interest for the first thru fourth
quarters of 1995 were $5.28, $5.47, $5.79 and $6.10, respectively. Quarterly
distributions increased for each of the four quarters of 1995 due to improved
operating results at several of the Partnership's mini-warehouse facilities. In
addition, the Partnership distributed $2.36 from Net Cash Proceeds in July 1995.
Limited Partners received distributions equal to 10% of Adjusted Original
Capital for 1995 (distributions paid in April, July and October 1995 and Jaunary
1996). Including the January 1996 distribution the Partnership has distributed
to Limited Partners $187.21 per interest, of which $181.77 represents Net Cash
Receipts and $5.44 represents Net Cash Proceeds. The General Partners intend to
retain on behalf of the Partnership cash reserves adequate to meet working
capital requirements as they may arise.
In 1995 the Financial Accounting Standards Board issued Statement SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of". SFAS No. 121 requires that long-lived assets and certain
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Partnership periodically reevaluates the carrying amounts of
its long-lived assets and the related depreciation and amortization periods as
discussed in the notes to the Partnership's Financial Statements, and the
Partnership believes that the adoption of SFAS No. 121 will not have a material
effect on its financial statements.
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.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements on Page F-1 of this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation
S-K is not applicable.
The net effect of the differences between the financial statements and the
tax information is summarized as follows:
December 31, 1995 December 31, 1994
Financial Tax Financial Tax
Statements Return Statements Return
Total assets $ 48,991,405 55,365,771 50,764,405 57,045,797
Partners' capital accounts:
General Partners $ 362,211 314,619 320,967 267,680
Limited Partners $ 46,997,465 53,896,444 49,516,046 55,851,225
Net income:
General Partners $ 41,244 46,939 48,161 48,936
Limited Partners $ 4,083,144 4,646,943 4,767,906 4,844,664
Per Limited Partnership
Interest $ 14.74 16.78 17.22 17.50
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
{PAGE}
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Neither the Registrant nor Balcor Storage Partners-85, one of the
General Partners, has a Board of Directors.
The other General Partner, Colonial Storage 85, Inc., has a Board of
Directors. The sole member is James R. Pruett (see b, c, e, and f
below) who has been a director since the formation of Colonial
Storage 85, Inc.
(b,c,
&e) The names, ages, and business experience of the executive officers and
significant employees of the General Partners of the Registrant are as
follows:
Balcor Storage Partners-85
TITLE OFFICERS
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Vice President Josette V. Goldberg
Senior Vice President Alan G. Lieberman
Senior Vice President, Chief Brian D. Parker
Financial Officer, Treasurer
and Assistant Secretary
Senior Vice President John K. Powell, Jr.
Thomas E. Meador (July 1947) joined Balcor in July 1979. He is
Chairman, President and Chief Executive Officer and has responsibility
for all ongoing day-to-day activities at Balcor. He is a Director of
The Balcor Company. He is also Senior Vice President of American
Express Company and is responsible for its real estate operations
worldwide. Prior to joining Balcor, Mr. Meador was employed at the
Harris Trust and Savings Bank in the commercial real estate
division where he was involved in various lending activities. Mr.
Meador received his M.B.A. degree from the Indiana University Graduate
School of Business.
Alexander J. Darragh (February 1955) joined Balcor in September 1988
and is responsible for due diligence analysis and real estate advisory
services for Balcor and American Express Company. He also has
supervisory responsibility of Balcor's environmental matters. Mr.
Darragh received masters' degrees in Urban Geography from Queen's
University and in Urban Planning from Northwestern University.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has
primary responsibility for all human resources matters. In addition,
she has supervisory responsibility for Balcor's MIS functions. Ms.
Goldberg has been designated as a Senior Human Resources Professional
(SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is
responsible for the Balcor's property sales and capital markets
functions. Mr. Lieberman is a Certified Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and, as Chief
Financial Officer and Chief Accounting Officer, is responsible for
Balcor's financial, legal and treasury functions. He is a director of
The Balcor Company. Mr. Parker is a Certified Public Accountant and
holds an M.S. degree in Accountancy from DePaul University.
John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is
responsible for portfolio and asset management matters relating to
Balcor's partnerships. Mr. Powell also has supervisory responsibility
for Balcor's risk management and investor services functions. He
received a Master of Planning degree from the University of Virginia.
Mr. Powell has been designated a Certified Real Estate Financier by
the National Society for Real Estate Finance and is a full member of
the Urban Land Institute.
Colonial Storage 85, Inc.
Name Title
James R. Pruett President, Vice President, Director
James N. Danford Secretary, Treasurer
James R. Pruett (September 1942) received his Bachelor of Science
degree from McMurry College in Abilene, Texas, in 1965. Mr. Pruett is
President and a Director of Colonial Storage 86, Inc., which serves as
a General Partner of Balcor/Colonial Storage Income Fund - 86
(BCSIF-86). Mr. Pruett developed the first Atlanta, Georgia, Colonial
Self Storage mini-warehouse facility in 1972. Since that time, he has
handled substantially all business aspects of mini-warehouse
development, construction, operation, and management. Mr. Pruett has
directed the site selection and development or acquisition of numerous
locations for mini-warehouses and office warehouses. Mr. Pruett is
President and a Director of Colonial Storage Management 85, Inc.
("CSM-85) and Colonial Storage Management 86, Inc.("CSM-86), which
manage the properties of the Registrant and the BCSIF-86, respectively.
James N. Danford (January 1959) received his Bachelor of Business
Administration degree from The University of Texas at Arlington.
Mr. Danford was a senior accountant with a public accounting firm
prior to joining Colonial Storage Centers in June of 1986.
Mr. Danford is a Certified Public Accountant, member of the Texas
Society of Certified Public Accountants, and is Chief Financial and
Accounting Officer.
The sole director of Colonial Storage 85, Inc. is not a director in
any company with a class of securities registered pursuant to Section
12 of the Securities Exchange Act of 1934 or subject to the
requirements of Section 15 (b) of the Act or any company registered as
an investment company under the Investment Company Act of 1940, but is
a director of four other corporations which act as general partners of
limited partnerships which have a class of securities registered
pursuant to Section 12 of the Act.
(d) There is no family relationship between any of the foregoing officers or
director.
(f) To the best of the Registrant's knowledge, there have been no events
under any bankruptcy act, no criminal proceedings, and no judgements
or injunctions material to the evaluation of the ability and integrity
of any current director or executive officer of Colonial Storage 85,
Inc., Colonial Storage Management 85, Inc., or any current executive
officer of Balcor Storage Partners-85 during the past five years.
Item 11. Executive Compensation
(a,b,c,
d&e) The Registrant has not paid and does not propose to pay any
renumeration to the executive officers and directors of the general
partners. Certain of these officers receive compensation from The
Balcor Company and Colonial Storage 85-Inc., (but not from the
Registrant) for services performed for various affiliated entities,
which may include services performed for the Registrant. However, the
general partners believe that any such compensation attributable to
services performed for the Registrant is immaterial to the Registrant.
See Note 3 of Notes to Financial Statements for the information
relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) As of December 31, 1995, no person owned of record or was known by the
Registrant to own beneficially more than 5% of the outstanding Limited
Partnership Interests of the Registrant.
(b) Balcor Storage Partners-85 and Colonial Storage 85, Inc. and its
officers and director own as a group the following Limited Partnership
Interests in the Registrant:
Title of Class Beneficially Owned Percent of Class
Limited Partnership Interests 400 less than 1%
Relatives and affiliates of the officers or director of the General
Partners own an additional twenty Limited Partnership Interests in the
Registrant.
(c) The Registrant is not aware of any arrangements, the operation of
which may result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
(a &
b) See Note 1 of Notes to Financial Statements for information relating
to the Partnership Agreement and the allocation of distributions and
profits and losses.
See Note 3 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
{PAGE}
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1&2) See Index to Financial Statements on page F-1 of this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of
Limited Partnership set forth as Exhibit 3 to Amendment No.
1 to the Registrant's Registration Statement Form S-11 dated
May 14, 1985 and to Registrant's Registration Statements
dated September 23, 1985, and January 29, 1986 (Registration
No. 2-95752, No. 33-357, and No. 33-2977, respectively) are
incorporated herein by reference.
(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 Registrant's Registration Statement on Form S-11 dated
January 29, 1986 (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 year ended
December 31, 1995 is attached hereto.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the quarter
ended December 31, 1995.
(c) Exhibits: See Item 14 (a)(3) above.
(d) Financial Statement Schedules: See Index to Financial Statements on Page
F-1 of this Form 10-K.
{PAGE}
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ James N. Danford
James N. Danford
Secretary/Treasurer (Principal
Financial and Accounting
Officer) of Colonial Storage 85,
Inc., a General Partner
Date: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
President and Chief Executive Officer
/s/ Thomas E. Meador (Principal Executive Officer) of Balcor
Thomas E. Meador Storage Partners-85, a General Partner March 29, 1996
Senior Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
/s/ Brian D. Parker Officer) of Balcor Storage Partners-85,
Brian Parker a General Partner March 29, 1996
/s/ James Pruett President and Director of Colonial
James Pruett Storage 85 Inc., a General Partner March 29, 1996
Secretary/Treasurer (Principal Financial
/s/ James N. Danford and Accounting Officer) of Colonial
James N. Danford Storage 85, Inc., a General Partner March 29, 1996
{PAGE}
Index to Financial Statements
Pages
Independent Auditors' Report F-2
Financial Statements:
Balance Sheets as of December 31, 1995 and 1994 F-3
Statements of Income, years ended December 31, 1995, 1994 and 1993 F-4
Statements of Partners' Capital, years ended December 31, 1995, 1994
and 1993 F-5
Statements of Cash Flows, years ended December 31, 1995, 1994 and
1993 F-6
Notes to Financial Statements F-7 to F-11
Schedules are omitted for the reason that they are inapplicable or
equivalent information has been included elsewhere herein.
{PAGE}
Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
The Partners
Balcor/Colonial Storage Income Fund - 85:
We have audited the financial statements of Balcor/Colonial Storage Income
Fund - 85 (an Illinois Limited Partnership) as listed in the accompanying
index. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Balcor/Colonial Storage
Income Fund - 85 as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Fort Worth, Texas
February 9, 1996
{PAGE}
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Balance Sheets
December 31, 1995 and 1994
1995 1994
Assets
Cash and cash equivalents $ 3,643,915 4,014,486
Accounts receivable, net of allowance for doubtful
accounts of $18,321 and $27,465 in 1995 and 1994,
respectively 148,300 110,990
Mortgage notes receivable (note 2) 1,649,953 1,676,085
Other 120,545 152,912
5,562,713 5,954,473
Mini-warehouse facilities:
Land 14,193,743 14,193,743
Buildings 47,445,774 46,901,166
Furniture, fixtures and equipment 1,060,425 982,631
62,699,942 62,077,540
Less accumulated depreciation 19,271,250 17,267,608
Mini-warehouse facilities, net of accumulated
depreciation 43,428,692 44,809,932
$ 48,991,405 50,764,405
Liabilities and Partners' Capital
Accounts payable $ 1,503 4,037
Due to affiliates (note 3) 825,200 190,858
Accrued real estate taxes 372,527 302,008
Other accrued liabilities 81,290 54,194
Security deposits 54,741 76,487
Deferred income 296,468 299,808
Total liabilities 1,631,729 927,392
Partners' capital (276,918 Limited Partnership
Interests issued and outstanding) 47,359,676 49,837,013
$ 48,991,405 50,764,405
See accompanying notes to financial statements.
{PAGE}
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Statements of Income
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
Income:
Rental $ 10,316,881 10,067,226 9,298,505
Interest on short-term investments 172,464 126,665 73,933
Interest from mortgage notes
receivable 158,451 167,204 139,085
10,647,796 10,361,095 9,511,523
Expenses:
Property operating 2,929,624 2,759,069 2,681,661
Depreciation 2,003,642 1,967,052 1,941,870
Property management fees (note 3) 532,242 297,186 277,295
Incentive management fees (note 3) 477,021 - -
General and administrative (note 3) 580,879 521,721 480,334
6,523,408 5,545,028 5,381,160
Income from operations 4,124,388 4,816,067 4,130,363
Loss on sale of land, property and
equipment (note 2) - - (40,841)
Net income $ 4,124,388 4,816,067 4,089,522
Limited Partners' share of net income
($14.74, $17.22 and $14.62 per
Interest for 1995, 1994 and 1993,
respectively) $ 4,083,144 4,767,906 4,048,627
General Partners' share of net income 41,244 48,161 40,895
$ 4,124,388 4,816,067 4,089,522
See accompanying notes to financial statements.
{PAGE}
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Statements of Partners' Capital
Years ended December 31, 1995, 1994 and 1993
Limited General
Partners Partners Total
Balance at December 31, 1992 $ 51,175,322 231,911 51,407,233
Net income 4,048,627 40,895 4,089,522
Cash distributions ($19.16 per
Interest) (5,305,745) - (5,305,745)
Balance at December 31, 1993 49,918,204 272,806 50,191,010
Net income 4,767,906 48,161 4,816,067
Cash distributions ($18.67 per
Interest) (5,170,064) - (5,170,064)
Balance at December 31, 1994 49,516,046 320,967 49,837,013
Net income 4,083,144 41,244 4,124,388
Cash distributions ($23.84 per
Interest) (6,601,725) - (6,601,725)
Balance at December 31, 1995 $ 46,997,465 362,211 47,359,676
See accompanying notes to financial statements.
{PAGE}
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
Operating activities:
Net income $ 4,124,388 4,816,067 4,089,522
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 2,003,642 1,967,052 1,941,870
Loss on sale of mini-warehouse
facilities (note 2) - - 40,841
Net change in:
Net accounts receivable (37,310) 17,867 (6,214)
Other assets 32,367 24,414 (40,777)
Accounts payable (2,534) 4,037 (77,738)
Due to affiliates 634,342 75,567 48,395
Accrued real estate taxes 70,519 (7,312) (18,187)
Other accrued liabilities 27,096 (3,170) 9,213
Security deposits (21,746) (54,669) (31,566)
Deferred income (3,340) (1,813) 25,454
Net cash provided by
operating activities 6,827,424 6,838,040 5,980,813
Investing activities:
Additions to mini-warehouse
facilities, net (622,402) (726,275) (690,197)
Proceeds from sale of land,
property and equipment - net
(note 2) - - 404,266
Collection of principal payments on
mortgage notes receivable
(note 2) 26,132 237,902 18,459
Net cash used in investing
activities (596,270) (488,373) (267,472)
Financing activities:
Distributions to Limited Partners (6,601,725) (5,170,064) (5,305,745)
Net cash used in financing
activities (6,601,725) (5,170,064) (5,305,745)
Net change in cash and cash
equivalents (370,571) 1,179,603 407,596
Cash and cash equivalents at
beginning of year 4,014,486 2,834,883 2,427,287
Cash and cash equivalents at
end of year $ 3,643,915 4,014,486 2,834,883
Supplemental Disclosure of Noncash Investing Activities
The Partnership sold two mini-warehouse facilities in 1993 for $1,195,000.
Consideration received included mortgage notes receivable for $745,000 (note 2).
See accompanying notes to financial statements
{PAGE}
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
December 31, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies
(a) Description of Partnership
Balcor/Colonial Storage Income Fund - 85 (the
"Partnership) is a limited partnership formed
in September 1983. The Partnership Agreement
provides that Balcor Storage Partners-85 (an
Illinois general partnership) and Colonial
Storage 85, Inc. (a Texas corporation) are
the General Partners of the Partnership and
provides for the admission of Limited
Partners through the sale of up to 320,000
Limited Partnership Interests at $250 per
Interest, of which 276,918 ($69,229,500)
Limited Partnership Interests were sold prior
to the termination of the offering.
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 acquired
sixty-nine mini-warehouse facilities from
affiliates in 1985 and four mini-warehouse
facilities from non-affiliated entities in
1986. The Partnership sold four mini-
warehouse facilities prior to 1995. The
remaining properties are located in various
markets within the United States.
(b) Allocation of Net Income and Profits
The Partnership Agreement provides that net
income (after a deduction for any incentive
management fees) from operations shall be
allocated 99% and 1% to the Limited Partners
and General Partners, respectively.
Additionally, when a property is sold or
otherwise disposed of, the General Partners
will be allocated profits equal to the
greater of 1% of total profits or the amount
of Net Cash Proceeds distributable to the
General Partners from the sale (in excess of
subordinated Net Cash Receipts, note 1(c)).
The balance of the profits will be allocated
to the Limited Partners.
{PAGE}
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
(c) Cash Distributions
Net Cash Receipts available for distribution
from operations shall be distributed 92% to
the Limited Partners and 8% to the General
Partners, 7% as their partnership incentive
management fee and 1% as their distributable
share from operations. Distributions from
operations to the General Partners are
currently subordinated to receipt by the Limited
Partners of a return equal to 10% on Adjusted
Original Capital.
Net Cash Proceeds from sales or refinancings
will be distributed first to the Limited
Partners until they have received any
deficiencies in the aforementioned minimum
cash distributions from operations.
Distributions to the Limited Partners will
then be made in an amount equal to total
Original Capital plus any deficiency in a
cumulative distribution of 12% of Adjusted
Original Capital for the period commencing
approximately one year following the
termination of the offering. If the receipt
of any portion of the General Partners' 8%
share of Net Cash Receipts from operations
(approximately $3,748,000 has been deferred
as of December 31, 1995) or the property
management fee (note 3) has been deferred as
a result of subordination, thereafter,
available Net Cash Proceeds will be
distributed to the General Partners to the
extent of such deferred amounts. Thereafter,
remaining Net Cash Proceeds will be
distributed 85% to the Limited Partners and
15% to the General Partners.
(d) Cash and Cash Equivalents
The Partnership considers all highly liquid
investments with maturities at the date of
purchase of three months or less to be cash
equivalents.
(e) Mini-Warehouse Facilities
Costs associated with the appraisal and
acquisition of mini-warehouse facilities are
capitalized.
{PAGE} Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
The buildings, furniture, fixtures, and
equipment are depreciated using the straight-
line method over their estimated useful lives
ranging from 7 to 25 years.
Maintenance and repairs are charged to
expense when incurred. Expenditures for
improvements are charged to the related asset
account.
The Partnership records its investments in
real estate at cost, and periodically
reevaluates the propriety of the carrying
amounts of its properties as well as the
amortization period to determine whether
current events and circumstances warrant
adjustments to the carrying amounts or a
revised estimate of the useful life. The
Partnership compares the undiscounted future
net cash flows expected to result from the
use of each of its properties to the carrying
amount of that property to determine whether
the Partnership shall recognize an impairment
loss. The Partnership believes that no
impairment has occurred and that no reduction
of the net recorded cost is warranted.
When properties are disposed of, the related
costs and accumulated depreciation will be
removed from the respective accounts, and any
gain or loss on disposition will be
recognized in accordance with generally
accepted accounting principles.
(f) Income Taxes
Taxable income or loss of the Partnership is
includable in the income tax returns of the
individual partners; therefore, no provision
for income taxes has been made in the
accompanying financial statements.
The tax bases of the Partnership's assets
exceeded the amounts recorded in the
Financial Statements at December 31, 1995
and 1994, by $6,374,366 and $6,281,392,
respectively.
{PAGE}
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
(g) Use of Estimates
Management of the Partnership has made a
number of estimates and assumptions relating
to the reporting of Assets and Liabilities to
prepare these financial statements in conformity
with Generally Accepted Accounting Principles.
Actual results could differ from those estimates.
(h) Fair Value of Financial Instruments
In accordance with the reporting requirements
of Statement on Financial Accounting Standards
No. 107, "Disclosures about Fair Value of
Financial Instruments," the Partnership
calculates the fair value of its financial
instruments and includes this additional
information in the notes to the financial
statements when the fair value is different than
the carrying value of those financial instruments.
When the fair value reasonably approximates the
carrying value, no additional disclosure is made.
(2) Mortgage Notes Receivable
The Partnership has three notes resulting from the sale
of mini-warehouse facilities in 1993, 1990 and 1989.
Two notes bear interest rates of 10% per annum with
monthly principal and interest payments based on a
25-year amortization schedule and final balloon
payments in 1996 and 1998, respectively. The other
note bears an interest rate of 8.5% per annum with
monthly principal and interest payments based on a
25-year amortization schedule and a final balloon
payment in 1998. The sale of two facilities in 1993
resulted in a loss for financial statement purposes
of $40,841.
(3) 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 twelve month period
{PAGE} Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
thereafter. Any deferred portion of the property
management fee will be paid only from distributed
Net Cash Proceeds. As of December 31, 1995 property
management fees of $1,991,890 were deferred.
The Limited Partners received distributions equal to
the 10% of Adjusted Original Capital for 1995
(distribution made in April, July and October, 1995
and January 1996). Consequently, in February, 1996
the Partnership paid $228,837 representing the amount
necessary to meet the 6% property management fee for
the nine months ended December 31, 1995. In addition,
the Partnership paid the General Partners $545,167
representing $477,021 of incentive management fees and
$68,146 as their distributive share of Net Cash Receipts.
In connection with the sales of the mini-warehouse
facilities made to date, the General Partners may
each receive a real estate commission of up to
$36,975 which have been subordinated in accordance
with the Partnership Agreement.
Certain general and administrative expenses are
reimbursed to affiliates of the General Partners to cover
administrative requirements of the Partnership.
Commissions, fees, and expenses paid and payable
by the Partnership to affiliates for the years
ended December 31, 1995, 1994 and 1993, are:
1995 1994 1993
Paid Payable Paid Payable Paid Payable
Property
management
fees $ 354,727 251,941 246,188 74,426 275,081 23,428
General and
administrative
expenses $ 392,417 22,288 343,434 42,482 302,912 17,913
Real estate
commissions $ - 73,950 - 73,950 - 73,950
Incentive
management
fees $ - 477,021 - - - -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 3644
<SECURITIES> 0
<RECEIVABLES> 1798
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5563
<PP&E> 62700
<DEPRECIATION> 19271
<TOTAL-ASSETS> 48992
<CURRENT-LIABILITIES> 1632
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 47360
<TOTAL-LIABILITY-AND-EQUITY> 48992
<SALES> 0
<TOTAL-REVENUES> 10648
<CGS> 0
<TOTAL-COSTS> 3462
<OTHER-EXPENSES> 3062
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4124
<INCOME-TAX> 0
<INCOME-CONTINUING> 4124
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4124
<EPS-PRIMARY> 14.74
<EPS-DILUTED> 14.74
</TABLE>
