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, 1996
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.)
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 an unsolicited offer for the purchase of
Limited Partnership Interests ("tender offer") in February 1997. The tender
offer was made by First Trust Investors, LLC (First Trust). First Trust
stated that their primary motive in making the offer was to make a profit
from the purchase of the Interests. The Registrant incurred administrative
costs in responding to the tender offer 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. During the second half of 1996, the Registrant solicited and
eceived bids from major institutional owners of mini-warehouse facilities
for a sale of all of the Registrant's assets. The General Partners have not
agreed to accept any of the submitted bids. However, discussions are
continuing with certain of the bidders. Limited Partner approval would
be required for any sale of two-thirds or more of the Registrant's
remaining assets. The General Partners cannot presently predict whether
any sale of the Registrant's assets will be consummated in the foreseeable
future.
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 52 full-time and 56 part-time employees engaged in
its operations.
<PAGE>
Item 2. Properties
As of December 31, 1996, 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
<PAGE>
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
<PAGE>
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 bbbb 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
<PAGE>
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
Mini-warehouse units in the above properties are rented with leases of one
year or less, with no tenant occupying greater than ten percent of the
property. Real estate taxes incurred in 1996 for the above properties
totaled $653,221.
The Federal tax basis of the Registrant's properties totaled $40,512,784 as
of December 31, 1996. For federal income tax purposes, the acquisition
costs of the properties are depreciated over useful lives ranging from 18
to 19 years using ACRS methods. Other minor assets are depreciated over
their applicable recovery periods.
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 1996.
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 1996.
<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, 1996, the number of record holders of Limited
Partnership Interests of the Registrant was 6,919.
Item 6. Selected Financial Data
Year Ended December 31
1996 1995 1994 1993 1992
Rental income $ 10,519,053 10,316,881 10,067,226 9,298,505 8,600,074
Interest income $ 248,062 330,915 293,869 213,018 194,020
Net income $ 4,043,793 4,124,388 4,816,067 4,089,522 3,443,706
Net income per
Limited
Partnership
Interest $ 14.46 14.74 17.22 14.62 12.31
Taxable income $ 4,015,081 4,693,882 4,893,600 3,930,321 3,208,375
Taxable income
per Limited
Partnership
Interest $ 14.35 16.78 17.50 14.05 11.47
Cash and
cash
equivalents $ 4,187,645 3,643,915 4,014,486 2,834,883 2,427,287
Total mini-
warehouse
properties, net
of accumulated
depreciation $ 41,655,334 43,428,692 44,809,932 46,050,709 48,492,489
Total assets $ 46,089,970 48,991,405 50,764,405 51,105,762 52,366,414
Distributions to
Limited
Partners $ 6,882,762 6,601,725 5,170,064 5,305,745 4,715,919
Distributions per
Limited
Partnership
Interest $ 24.85 23.84 18.67 19.16 17.03
Properties
owned on
December 31 69 69 69 69 71
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Summary of Operations
The net income of Balcor/Colonial Storage Income Fund-85 (the Partnership")
remained relatively unchanged from 1995 to 1996. 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. 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
1996 Compared to 1995
Due to an overall increase in rental rates at the Partnership's mini-
warehouse facilities, rental income increased during 1996 as compared to 1995.
Rental income increased slightly in the Dallas/Fort Worth, Georgia and Carolina
regions and decreased slightly in the West Texas region.
Interest income from short term investments decreased during 1996 as
compared to 1995 as a result of a decrease in amounts available for
investment primarily due to the payment of the additional 3% property
management fee and incentive management fees during the first quarter of
1996.
Interest income from mortgage notes receivable decreased during 1996 as
compared to 1995 due to the receipt of the entire balance of the
outstanding mortgage notes during 1996.
The Limited Partners received distributions equal to 10% of Adjusted
Original Capital for the period April 1995 through March 1996 and for the
period April 1996 through March 1997. In accordance with the Partnership
Agreement, the full 6% management fee was recognized for the twelve months
ended March 31, 1996 and the nine months ended December 31, 1995. The
recognition of the additional management fee was the primary reason
anagement fees increased for 1996 as compared to 1995.
Higher payroll and supply expenses as well as professional fees and
printing and postage costs incurred in connection with the tender offers
during 1996 resulted in an increase in general and administrative expenses
for 1996 as compared to 1995.
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 cash balances available for investment as well as
an increase in rates during the first half of 1996.
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.
Liquidity and Capital Resources
The cash position of the Partnership increased by approximately $544,000
from December 31, 1995, to December 31, 1996 as cash generated from
operations and payments received on mortgage notes receivable exceeded
distributions to Limited Partners and capital expenditures. The
Partnership's cash flow provided by operating activities in 1996 of
approximately $6,100,000 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. Payment of the balance on mortgage notes
receivable of approximately $1,650,000 resulted in cash flow provided from
investing activities. Additionally, $256,000 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 and General Partners totaling
approximately $6,951,000.
Accounts receivable net of the related allowance for doubtful accounts
decreased from December 31, 1995 to December 31, 1996 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.
In September, 1996, the Partnership received $508,364, $797,114 and
$323,172 in full satisfaction of the remaining mortgage notes receivable
resulting from the sale of mini-warehouse facilities in 1993, 1990 and 1
989, respectively.
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 $549,026 in January, 1997 ($480,398 as its
incentive management fee and $68,628 as their distributive share of Net
Cash Receipts). From the inception of the offering through December 31,
1996, the General Partners' share of Net Cash Receipts totaled
approximately $4,838,000, $3,748,000 of which is subordinated. The General
Partners are entitled to receive subordinated amounts only from distributed
Net Cash Proceeds.
In January 1997, the Partnership paid $1,122,461 ($4.05 per Interest) to
the Limited Partners representing the quarterly Net Cash Receipts
distribution for the fourth quarter of 1996 and $1,256,265 ($4.54 per
Interest) representing the distribution of Net Cash Proceeds earned from
the receipt of the balance of mortgage notes; $647,105 ($2.34 per Interest)
of which is considered a return of original capital. 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 remained constant at $6.25 for the first three quarters of
1996 and increased to $8.59 per Interest for the fourth quarter of 1996.
Quarterly distributions increased for the fourth quarter of 1996 due to
epayment of the mortgage notes receivable. Limited Partners received
distributions equal to 10% of Adjusted Original Capital for 1996
(distributions paid in April, July and October 1996 and January 1997).
Including the January 1997 distribution, the Partnership has distributed to
Limited Partners $215.71 per Interest, of which $213.37 represents Net Cash
Receipts and Net Cash Proceeds and $2.34 represents return of original
capital. The General Partners intend to retain on behalf of the Partnership
cash reserves adequate to meet working capital requirements as they may
arise.
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. During the second half of 1996, the Registrant solicited and
received bids from major institutional owners of mini-warehouse facilities
for a sale of all of the Registrant's assets. The General Partners have
not agreed to accept any of the submitted bids.
However, discussions are continuing with certain of the bidders. Limited
Partner approval would be required for any sale of two-thirds or more of
the Registrant's remaining assets. The General Partners cannot presently
predict whether any sale of the Registrant's assets will be consummated
in the foreseeable future.
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>
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, 1996 December 31, 1995
Financial Tax Financial Tax
Statements Return Statements Return
Total assets $ 46,089,970 52,569,595 48,991,405 55,365,771
Partners' capital
accounts:
General Partners $ 334,503 390,166 362,211 314,619
Limited Partners $ 44,118,058 51,022,418 46,997,465 53,896,444
Net income:
General Partners $ 40,438 41,511 41,244 46,939
Limited Partners $ 4,003,355 4,109,570 4,083,144 4,646,943
Per Limited
Partnership
Interest $ 14.46 14.84 14.74 16.78
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 James E. Mendelson
Senior Vice President John K. Powell, Jr.
Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 49) 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 (age 42) 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 for Balcor's environmental matters. Mr.
Darragh received masters' degrees in Urban Geography from Queen's
University and in Urban Planning from Northwestern University.
James E. Mendelson (age 34) joined Balcor in July 1984 and is
responsible for Balcor's property sales activities. He also has
supervisory responsibility for Balcor's accounting, financial,
treasury, investor services and investment administration functions.
From 1989 to 1995, Mr. Mendelson was Vice President - Transaction
Management and Vice President - Senior Transaction Manager and had
responsibility for various asset management matters relating to real
estate investments made by Balcor, including negotiations for the
restructuring of mortgage loan investments. Mr. Mendelson received
his M.B.A. degree from the University of Chicago.
John K. Powell Jr. (age 46) 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 function. 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.
Jayne A. Kosik (age 39) joined Balcor in August 1982 and, as Chief
Financial Officer, is responsible for Balcor's financial, human
resources and treasury functions. From June 1989 until October 1996,
Ms. Kosik had supervisory responsibility for accounting functions
relating to Balcor's public and private partnerships. She is also
Treasurer and a Managing Director of The Balcor Company. Ms. Kosik
is a Certified Public Accountant.
Colonial Storage 85, Inc.
Name Title
James R. Pruett President, Vice President, Director
James N. Danford Secretary, Treasurer
James R. Pruett (54) received his Bachelor of Science degree from McMurry
College in Abilene, Texas, in 1965. 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) which manage the properties of the
Registrant.
James N. Danford (38) 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 ection
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 judgments
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.
<PAGE>
Item 11. Executive Compensation
(a,b,c,
d&e) The Registrant paid $2,505 in 1996 with respect to one of the
executive officers and directors of The Balcor Company. The
Registrant has not paid and does not propose to pay any renumeration
to the remaining executive officers and directors of the General
Partners. Certain of the remaining officers receive compensation
from The Balcor Company and Colonial Storage-85Inc., (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) The following entity is the sole Limited Partner which owns
beneficially more than 5% of the outstanding Limited Partnership
Interests of the Registrant.
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Title of Class Owner Ownership Class
Limited Public 30,317.28 10.95%
Partnership Storage, Inc. Limited
Interests Glendale, Partnership
California Interests
(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, 1996 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, 1996.
(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 31, 1997
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
/s/ Thomas E. Meador President and Chief Executive Officer
Thomas E. Meador (Principal Executive Officer) of Balcor
Storage Partners-85, a General Partner March 31, 1997
/s/ Jayne A. Kosik Managing Director and Chief Accounting
Jayne A. Kosik and Financial Officer (Principal
Accounting Officer) of Balcor Storage
Partners-85, a General Partner March 31, 1997
/s/ James R. Pruett President and Director of Colonial
James R. Pruett Storage 85 Inc., a General Partner March 31, 1997
/s/ James N. Danford Secretary/Treasurer (Principal Financial
James N. Danford and Accounting Officer) of Colonial
Storage 85, Inc., a General Partner March 31, 1996
<PAGE>
Index to Financial Statements
Pages
Independent Auditors' Report F-2
Financial Statements:
Balance Sheets as of December 31, 1996 and 1995 F-3
Statements of Income, years ended December 31, 1996, 1995 and 1994 F-4
Statements of Partners' Capital, years ended December 31, 1996, 1995
and 1994 F-5
Statements of Cash Flows, years ended December 31, 1996, 1995 and
1994 F-6
Notes to Financial Statements F-7 to F-10
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, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Fort Worth, Texas
March 11, 1997
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Balance Sheets
December 31, 1996 and 1995
1996 1995
Assets
Cash and cash equivalents $ 4,187,645 3,643,915
Accounts receivable, net of allowance for doubtful
accounts of $19,068 and $18,321 in 1996 and 1995,
respectively 122,698 148,300
Mortgage notes receivable (note 2) - 1,649,953
Other 124,293 120,545
4,434,636 5,562,713
Mini-warehouse facilities:
Land 14,193,743 14,193,743
Buildings 47,634,567 47,445,774
Furniture, fixtures and equipment 1,127,156 1,060,425
62,955,466 62,699,942
Less accumulated depreciation 21,300,132 19,271,250
Mini-warehouse facilities, net of accumulated
depreciation 41,655,334 43,428,692
$ 46,089,970 48,991,405
Liabilities and Partners' Capital
Accounts payable $ - 1,503
Due to affiliates (note 3) 902,658 825,200
Accrued real estate taxes 302,408 372,527
Other accrued liabilities 48,932 81,290
Security deposits 43,333 54,741
Deferred income 340,078 296,468
Total liabilities 1,637,409 1,631,729
Partners' capital (note 4)(276,918 Limited
Partnership Interests issued and outstanding) 44,452,561 47,359,676
$ 46,089,970 48,991,405
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Statements of Income
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Income:
Rental $ 10,519,053 10,316,881 10,067,226
Interest on short-term investments 132,236 172,464 126,665
Interest from mortgage notes
receivable 115,826 158,451 167,204
10,767,115 10,647,796 10,361,095
Expenses:
Property operating 2,832,574 2,929,624 2,759,069
Depreciation 2,028,882 2,003,642 1,967,052
Property management fees (note 3) 623,983 532,242 297,186
Incentive management fees (note 3) 480,398 477,021 -
General and administrative (note 3) 757,485 580,879 521,721
6,723,322 6,523,408 5,545,028
Net income $ 4,043,793 4,124,388 4,816,067
Limited Partners' share of net income
($14.46, $14.74 and $17.22 per
Interest for 1996, 1995 and 1994,
respectively) $ 4,003,355 4,083,144 4,767,906
General Partners' share of net income 40,438 41,244 48,161
$ 4,043,793 4,124,388 4,816,067
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, 1996, 1995 and 1994
Limited General
Partners Partners Total
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
Limited Partner 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
Limited Partner Interest) (6,601,725) - (6,601,725)
Balance at December 31, 1995 46,997,465 362,211 47,359,676
Net income 4,003,355 40,438 4,043,793
Cash distributions ($24.85 per
Limited Partner Interest) (6,882,762) - (6,882,762)
Cash distribution to
General Partners - (68,146) (68,146)
Balance at December 31, 1996 $ 44,118,058 334,503 44,452,561
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, 1996, 1995 and 1994
1996 1995 1994
Operating activities:
Net income $ 4,043,793 4,124,388 4,816,067
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 2,028,882 2,003,642 1,967,052
Net change in:
Net accounts receivable 25,602 (37,310) 17,867
Other assets (3,748) 32,367 24,414
Accounts payable (1,503) (2,534) 4,037
Due to affiliates 77,458 634,342 75,567
Accrued real estate taxes (70,119) 70,519 (7,312)
Other accrued liabilities (32,358) 27,096 (3,170)
Security deposits (11,408) (21,746) (54,669)
Deferred income 43,610 (3,340) (1,813)
Net cash provided by
operating activities 6,100,209 6,827,424 6,838,040
Investing activities:
Additions to mini-warehouse
facilities, net (255,524) (622,402) (726,275)
Collection of principal payments on
mortgage notes receivable
(note 2) 1,649,953 26,132 237,902
Net cash provided by (used in)
investing activities 1,394,429 (596,270) (488,373)
Financing activities:
Distributions to Limited Partners (6,882,762) (6,601,725) (5,170,064)
Distribution to General Partners (68,146) - -
Net cash used in financing
activities (6,950,908) (6,601,725) (5,170,064)
Net change in cash and cash
equivalents 543,730 (370,571) 1,179,603
Cash and cash equivalents at
beginning of year 3,643,915 4,014,486 2,834,883
Cash and cash equivalents at
end of year $ 4,187,645 3,643,915 4,014,486
See accompanying notes to financial statements
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
(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 1996. 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.
(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
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
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, 1996) 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.
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 adopted the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of", on January 1, 1996. This
Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount
of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. Adoption of this Statement had no
impact on the Partnership's financial position, results of
operations, or liquidity.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
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, 1996 and
1995, by $6,479,625 and $6,374,366, respectively.
(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 had three notes resulting from the sale of mini-
warehouse facilities in 1993, 1990 and 1989. Two notes bore 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 bore 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. In
September, 1996 the notes were repaid in full in the amount of
$1,628,650.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
(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 thereafter. Any deferred portion of the property
management fee will be paid only from distributed Net Cash Proceeds.
As of December 31, 1996 property management fees of $1,991,890 were
deferred.
The Limited Partners received distributions equal to 10% of Adjusted
Original Capital for the period April 1995 through March 1996 and for
the period April 1996 through March 1997. Consequently, in January
1997 and February 1996, the Partnership paid Colonial Storage
Management 85, Inc. $234,057 and $228,837, respectively, representing
the amount necessary to meet the 6% property management fee. For the
same periods mentioned above the General Partners received $549,026
($480,398 as incentive management fees and $68,628 as their
distributive share of Net Cash Receipts) in January 1997, and $545,167
($477,021 as incentive management fees and $68,146 as their
distributive share of Net Cash Receipts) in February 1996. Incentive
management fees have been accrued at December 31, 1996 and 1995, while
the General Partners distributive share of Net Cash Receipts are
deducted from Partners' Capital when paid.
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.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
Commissions, fees, and expenses paid and payable by the Partnership to
affiliates for the years ended December 31, 1996, 1995 and 1994, are:
1996 1995 1994
Paid Payable Paid Payable Paid Payable
Property
management
fees $ 615,969 259,955 354,727 251,941 246,188 74,426
General and
administrative
expenses $ 419,375 88,395 392,417 22,328 343,434 42,522
Real estate
commissions $ - 73,910 - 73,910 - 73,910
Incentive
management
fees $ 477,021 480,398 - 477,021 - -
(4) Subsequent Event
In January 1997, the Partnership paid $1,122,461 ($4.05 per Interest)
to the Limited Partners representing the quarterly Net Cash Receipts
distribution for the fourth quarter of 1996 and $1,256,265 ($4.54 per
Interest) representing the distribution of Available Net Cash Proceeds
from the receipt of the balance of mortgage notes, $647,105 ($2.34 per
Interest) of which is considered a return of capital.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 4188
<SECURITIES> 0
<RECEIVABLES> 123
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4435
<PP&E> 62955
<DEPRECIATION> 21300
<TOTAL-ASSETS> 46090
<CURRENT-LIABILITIES> 1637
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 47360
<TOTAL-LIABILITY-AND-EQUITY> 46090
<SALES> 0
<TOTAL-REVENUES> 10767
<CGS> 0
<TOTAL-COSTS> 3457
<OTHER-EXPENSES> 3266
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4044
<INCOME-TAX> 0
<INCOME-CONTINUING> 4044
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4044
<EPS-PRIMARY> 14.46
<EPS-DILUTED> 14.46
</TABLE>
