FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number: 0-14340
Balcor/Colonial Storage Income Fund - 85
(Exact name of registrant as specified in its charter)
Illinois 36-3338930
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2355 Waukegan Road Suite A200
Bannockburn, Illinois 60015
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (847) 267-1600
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No .
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Balance Sheets
March 31, 1997 and December 31, 1996
1997
(Unaudited) 1996
Assets
Cash and cash equivalents $ 2,495,586 4,187,645
Accounts receivable, net of allowance for doubtful
accounts of $16,751 at March 31, 1997 and $19,068
at December 31, 1996 103,425 122,698
Other 124,405 124,293
2,723,416 4,434,636
Mini-warehouse facilities:
Land 14,193,743 14,193,743
Buildings 47,783,627 47,634,567
Furniture, fixtures, and equipment 1,127,156 1,127,156
63,104,526 62,955,466
Less accumulated depreciation 21,786,362 21,300,132
Mini-warehouse facilities, net of accumulated
depreciation 41,318,164 41,655,334
$ 44,041,580 46,089,970
Liabilities and Partners' Capital
Due to affiliates $ 242,876 902,658
Accrued real estate taxes 247,649 302,408
Other accrued liabilities 48,932 48,932
Security deposits 40,340 43,333
Deferred income 395,506 340,078
Total liabilities 975,303 1,637,409
Partners' capital:
Limited Partners (276,918 Limited Partnership
Interests issued and outstanding) 42,789,791 44,118,058
General Partners 276,486 334,503
43,066,277 44,452,561
$ 44,041,580 46,089,970
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Statements of Income
For the Three Months Ended March 31, 1997 and 1996
(Unaudited)
1997 1996
Income:
Rental $ 2,565,593 2,564,094
Interest on short-term investments 25,435 34,895
Interest from mortgage notes receivable - 39,210
2,591,028 2,638,199
Expenses:
Property operating 675,890 719,796
Depreciation 486,230 486,850
Property management fees 154,848 155,954
General and administrative 212,990 175,871
1,529,958 1,538,471
Net income $ 1,061,070 1,099,728
Limited Partners' share of net income ($3.79 and
$3.93 per Interest for the three months ended
March 31, 1997 and 1996, respectively) $ 1,050,459 1,088,731
General Partners' share of net income 10,611 10,997
$ 1,061,070 1,099,728
Distribution to Limited Partners ($8.59 and $6.10
per Interest for the three months ended
March 31, 1997 and 1996, respectively) $ 2,378,726 1,689,200
Distribution to General Partners $ 68,628 68,146
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Statements of Cash Flows
For the Three Months Ended March 31, 1997 and 1996
(Unaudited)
1997 1996
Operating activities:
Net income $ 1,061,070 1,099,728
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 486,230 486,850
Net change in:
Net accounts receivable 19,273 5,495
Other assets (112) (7,794)
Accounts payable - 28,297
Due to affiliates (659,782) (662,729)
Accrued real estate taxes (54,759) (156,705)
Other accrued liabilities - (32,358)
Security deposits (2,993) (2,666)
Deferred income 55,428 37,399
Net cash provided by operating
activities 904,355 795,517
Investing activities:
Additions to mini-warehouse facilities, net (149,060) (58,333)
Collection of principal payments on mortgage
notes receivable - 6,932
Net cash used in investing activities (149,060) (51,401)
Financing activities:
Distribution to Limited Partners (2,378,726) (1,689,200)
Distribution to General Partners (68,628) (68,146)
Net cash used in financing activities (2,447,354) (1,757,346)
Net change in cash and cash equivalents (1,692,059) (1,013,230)
Cash and cash equivalents at beginning of period 4,187,645 3,643,915
Cash and cash equivalents at end of period $ 2,495,586 2,630,685
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Notes to Financial Statements
1) Summary of Significant Accounting Policies
In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the
three months ended March 31, 1997, and all such adjustments are of a
normal and recurring nature.
2) Transactions With Affiliates
The Partnership has an agreement with Colonial Storage Management 85,
Inc., an affiliate of Colonial Storage 85, Inc., a General Partner, to
supervise and direct the business and affairs associated with the
mini-warehouse facilities for a fee of 6% of the gross revenues of the
facilities. One-half of this property management fee is subordinated
to receipt by the Limited Partners of a Special Distribution of 8%
during the first twelve-month period after termination of the offering,
9% during the second twelve-month period, and 10% during each 12-month
period thereafter. Any deferred portion of the property management fee
will be paid only from distributed Net Cash Proceeds. As of
March 31, 1997, property management fees of $1,991,890 were deferred.
Fees and expenses paid and payable by the Partnership to affiliates
for the quarter ended March 31, 1997 are:
Paid Payable
Property management fees (A) $ 360,693 54,110
General and administrative expenses 79,747 114,856
Incentive management fees (B) 480,398 -
Property sales commissions (C) - 73,910
(A) Includes payment of the subordinated 3% property management fee
since Limited Partners received distributions equal to 10% of
Adjusted Original Capital for the twelve month period ending
March 31, 1997.
(B) Represents fees paid to the General Partners due to the
receipt by Limited Partners of the Special Distribution of
10% referred to above.
(C) These commissions payable to the General
Partners have been subordinated in accordance
with the Partnership Agreement.
3) Subsequent Event
In April 1997, the Partnership paid $1,583,971 to the Limited Partners
representing the quarterly distribution for the first quarter of 1997.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor/Colonial Storage Income Fund - 85 (the "Partnership") is a limited
partnership formed in September 1983. The principal purpose of the Partnership
is to acquire, own, maintain, operate, lease, and hold for capital appreciation
and current income existing mini-warehouse facilities offering storage space for
business and personal use. The Partnership raised $69,229,500 through the sale
of Limited Partnership Interests and utilized these proceeds to acquire 69
mini-warehouse facilities from affiliates in 1985 and 4 mini-warehouse
facilities from non-affiliated entities in 1986. The Partnership sold one
mini-warehouse facility in 1989, one facility in 1990 and two facilities in
1993. As of March 31, 1997 the Partnership continues to operate 69
mini-warehouse facilities.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1996 for a more complete understanding of the
Partnership's financial position.
Operations
Summary of Operations
Cessation of interest income from mortgage notes receivable and a decline in
interest income from short-term investments were partially offset by decreases
in property operating expenses resulting in a decrease in net income during the
first quarter of 1997 as compared to the first quarter of 1996. 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.
1997 Compared to 1996
Rental revenues remained constant during the first quarter of 1997 as compared
to the first quarter of 1996. Rental income increased slightly in the Carolina
and East Texas Regions (three percent, respectively), decreased slightly in the
Dallas/Fort Worth and West Texas regions (three and two percent, respectively),
and remained unchanged in the Georgia region.
Interest income from short term investments decreased during the quarter ended
March 31, 1997 as compared to the same period in 1996 as a result of a decrease
in amounts available for investment.
The Partnership received a repayment of the mortgage notes receivable during
1996; consequently, interest income from mortgage notes receivable ceased during
the quarter ended March 31, 1997.
Higher payroll and professional fees resulted in an increase in general and
administrative expenses for the first quarter of 1997 as compared to the same
quarter in 1996.
A reduction in maintenance and supplies expenses resulted in a decrease in
property operating expenses for the quarter ended March 31, 1997 as compared to
the same quarter in 1996.
<PAGE>
Liquidity and Capital Resources
The cash position of the Partnership decreased approximately $1,692,000 from
December 31, 1996, to March 31, 1997. The Partnership's cash flow provided by
operating activities of approximately $904,000 in the first quarter of 1997 was
generated primarily by the operations of the mini-warehouse properties and
interest income received on the Partnership's short term investments, which were
partially offset by administrative expenses and the payment of additional
property management fees and Partnership incentive management fees for 1996, as
discussed below. Cash flow of approximately $149,000 was used in investing
activities to make capital improvements to the properties, which included
security and roofing expenditures. In addition, cash of approximately $2,447,000
was used in financing activities to provide distributions to the Limited and
General Partners.
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. The General
Partners received $549,026 in January, 1997 ($480,398 as an incentive management
fee and $68,628 as their distributive share of Net Cash Receipts). From the
inception of the offering through March 31, 1997, the General Partner's share of
Net Cash Receipts totaled approximately $4,963,000 of which $3,869,000 is
subordinated. The General Partners are entitled to receive subordinated amounts
only from distributed Net Cash Proceeds.
Accounts receivable net of the related allowance for doubtful accounts decreased
from December 31, 1996 to March 31, 1997 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.
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 Partnership solicited and received bids from
major institutional owners of mini-warehouse facilities for a sale of all of the
Partnership'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 Partnership's remaining assets. The General Partners cannot
presently predict whether any sale of the Partnership's assets will be
consummated in the foreseeable future.
In April 1997, the Partnership paid $1,583,971 ($5.72 per Interest) to the
Limited Partners representing the quarterly distribution for the first quarter
of 1997. Including the April 1997 distribution, the Partnership has distributed
$221.43 per $250 Interest. The General Partners believe the cash flow generated
from property operations should enable the Partnership to continue making
quarterly distributions to Limited Partners. However, the level of future cash
distributions to Limited Partners will be dependent upon the amount of cash flow
generated by the Partnership's properties, as to which there can be no
assurance. Quarterly distributions decreased for the first quarter of 1997 as
compared to the fourth quarter of 1996. The decrease is due primarily to the
distribution of the mortgage notes receivable proceeds in January, 1997. The
General Partners intend to retain on behalf of the Partnership cash reserves
deemed adequate to meet working capital requirements as they may arise.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may
lead to increased rental revenues and real estate values.
<PAGE>
Balcor/Colonial Storage Income Fund - 85
(An Illinois Limited Partnership)
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(4) Form of Subscription Agreement previously filed as
Exhibit 4.1 to Amendment No. 1 to the Registrant's
Registration Statement on Form S-11 dated May 14, 1985
and to the Registrant's Registration Statement on Form
S-11 dated January 29, 1985 (Registration No. 2-95752,
and No. 33-2977, respectively) and Form of Confirmation
regarding Interests in the Registrant set forth as
Exhibit 4.2 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1992 (Commission File No.
0-14340) are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the
quarter ended March 31, 1997 is attached hereto.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter
ended March 31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Balcor/Colonial Storage Income Fund - 85
By: /s/ Thomas E. Meador
Thomas E. Meador,
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Storage Partners-85, a General Partner
By: /s/ Jayne A. Kosik
Jayne A. Kosik,
Managing Director and Chief Accounting
and Financial Officer (Principal Accounting
Officer) of Balcor Storage Partners-85, a
General Partner
By: /s/ James R. Pruett
James R. Pruett
President and Director of Colonial
Storage 85, Inc., a General Partner
By: /s/ James N. Danford
James N. Danford,
Secretary/Treasurer (Principal Financial
and Accounting Officer) of Colonial
Storage 85, Inc., a General Partner
Date: May 15, 1997
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<PERIOD-END> MAR-31-1997
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<ALLOWANCES> 0
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<CURRENT-ASSETS> 2723
<PP&E> 63105
<DEPRECIATION> 21786
<TOTAL-ASSETS> 44042
<CURRENT-LIABILITIES> 976
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0
0
<OTHER-SE> 43066
<TOTAL-LIABILITY-AND-EQUITY> 44042
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<CGS> 0
<TOTAL-COSTS> 830
<OTHER-EXPENSES> 800
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