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
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-14352
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BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Illinois 36-3344227
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
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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
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<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
------------- --------------
Cash and cash equivalents $ 2,965,090 $ 2,872,521
Accounts and accrued interest receivable 545,143 215,118
Prepaid expenses 145,598
Deferred expenses, net of accumulated
amortization of $457,919 in 1995 and
$368,754 in 1994 88,599 177,764
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3,744,430 3,265,403
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Investment in real estate, at cost:
Land 10,567,930 10,567,930
Buildings and improvements 58,506,072 58,506,072
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69,074,002 69,074,002
Less accumulated depreciation 22,765,807 21,891,020
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Investment in real estate, net of
accumulated depreciation 46,308,195 47,182,982
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$ 50,052,625 $ 50,448,385
============= ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 62,600 $ 87,997
Due to affiliates 9,217 72,322
Accrued real estate taxes 113,728
Security deposits 295,602 303,114
Mortgage notes payable 29,532,069 29,854,081
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Total liabilities 30,013,216 30,317,514
Partners' capital (57,074 Limited
Partnership Interests issued and
outstanding) 20,039,409 20,130,871
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$ 50,052,625 $ 50,448,385
============= ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental and service $ 4,934,898 $ 5,074,458
Interest on short-term investments 95,370 30,580
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Total income 5,030,268 5,105,038
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Expenses:
Interest on mortgage notes payable 1,497,277 1,493,145
Depreciation 874,787 1,007,538
Amortization of deferred expenses 89,165 91,088
Property operating 1,829,304 2,134,414
Real estate taxes 390,709 479,587
Property management fees 249,462 269,639
Administrative 191,026 214,970
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Total expenses 5,121,730 5,690,381
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Net loss $ (91,462) $ (585,343)
============== ==============
Net loss allocated to General Partner $ (915) $ (5,853)
============== ==============
Net loss allocated to Limited Partners $ (90,547) $ (579,490)
============== ==============
Net loss per Limited Partnership Interest
(57,074 issued and outstanding) $ (1.59) $ (10.15)
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental and service $ 2,475,879 $ 2,536,848
Interest on short-term investments 41,034 19,221
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Total income 2,516,913 2,556,069
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Expenses:
Interest on mortgage notes payable 750,755 753,846
Depreciation 437,393 503,770
Amortization of deferred expenses 44,583 45,545
Property operating 990,070 1,077,464
Real estate taxes 195,418 239,793
Property management fees 123,587 135,889
Administrative 106,834 106,074
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Total expenses 2,648,640 2,862,381
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Net loss $ (131,727) $ (306,312)
============== ==============
Net loss allocated to General Partner $ (1,317) $ (3,063)
============== ==============
Net loss allocated to Limited Partners $ (130,410) $ (303,249)
============== ==============
Net loss per Limited Partnership Interest
(57,074 issued and outstanding) $ (2.29) $ (5.31)
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net loss $ (91,462) $ (585,343)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation of properties 874,787 1,007,538
Amortization of deferred expenses 89,165 91,088
Net change in:
Accounts receivable (330,025) (3,064)
Prepaid expenses (145,598)
Accounts payable (25,397) (31,751)
Due to affiliates (63,105) 93,831
Accrued liabilities 113,728 369,971
Security deposits (7,512) 1,839
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Net cash provided by operating activities 414,581 944,109
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Financing activities:
Principal payments on mortgage notes
payable (322,012) (243,147)
Proceeds from issuance of mortgage
notes payable 576,143
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Net cash used in or provided by financing
activities (322,012) 332,996
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Net change in cash and cash equivalents 92,569 1,277,105
Cash and cash equivalents at beginning
of period 2,872,521 1,121,400
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Cash and cash equivalents at end of period $ 2,965,090 $ 2,398,505
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
A reclassification has been made to the previously reported 1994 statements in
order to provide comparability with the 1995 statements. This reclassification
has not changed the 1994 results. In the opinion of management, all
adjustments necessary for a fair presentation have been made to the
accompanying statements for the six months and quarter ended June 30, 1995, and
all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the six months ended June 30, 1995 and 1994, the Partnership incurred
interest expense on mortgage notes payable of $1,497,277 and $1,493,145 and
paid interest expense of $1,497,277 and $1,243,531, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1995 are:
Paid
----------------------
Six Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $ 152,348 $152,348 $ 9,217
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Current Income Fund-85 A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1985 to invest in and operate
income-producing real property. The Partnership raised $57,074,000 through the
sale of Limited Partnership Interests and utilized these proceeds to acquire
five real property investments. The Partnership continues to operate these five
properties.
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 1994 for a more complete understanding of
the Partnership's financial position.
Summary of Operations
---------------------
As a result of improved operations at two of the Partnership's properties and
decreased depreciation expense at American Way Mall due to an investment
property writedown during 1994, the Partnership recognized a smaller net loss
for the six months and quarter ended June 30, 1995 as compared to the same
periods in 1994. Further discussion of the Partnership's operations are
summarized below.
1995 Compared to 1994
---------------------
Rental and service income decreased during the six months and quarter ended
June 30, 1995 as compared to the same periods in 1994 as a result of a decrease
in occupancy at American Way Mall. The decrease in rental and service income
was partially offset by increases in rental income at El Dorado Hills and
Providence Square Apartments due to increased average rental rates and/or
occupancy.
Increased cash available for short-term investment and higher average interest
rates were the primary reasons for an increase in interest income on short-term
investments during the six months and quarter ended June 30, 1995 as compared
to the same periods in 1994.
During the latter part of 1994, the Partnership determined that the value of
the American Way Mall had been impaired. Accordingly, the Partnership
recognized a provision for investment property writedown in 1994 which resulted
in a decrease in depreciation expense for the six months and quarter ended June
30, 1995 as compared to the same periods in 1994.
Due to decreases in plumbing repairs and carpeting expenditures at El Dorado
Hills Apartments, and the completion of the repair and renovation program at
Providence Square Apartments, property operating expense decreased for the six
months and quarter ended June 30, 1995 as compared to the same periods in 1994.
The decrease in expense for the quarter ended June 30, 1995 was partially
offset by an increase in collection fees related to delinquent rent at American
Way Mall.
<PAGE>
Due to reductions by the taxing authorities in the assessed values of the
American Way Mall and the El Dorado Hills apartment complex, real estate tax
expense decreased during the six months and quarter ended June 30, 1995 as
compared to the same periods in 1994.
Administrative expense decreased during the six months ended June 30, 1995 as
compared to the same period in 1994 as a result of a decrease in investor and
data processing costs and printing fees.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership increased as of June 30, 1995 when
compared to December 31, 1994 primarily due to increased cash flow generated by
the Partnership's properties, which is being retained by the Partnership for
working capital reserves. The Partnership's cash flow provided by operating
activities in 1995 was generated primarily from the operations of the
Partnership's properties and interest earned on short-term investments, and was
partially offset by the payment of administrative costs. The cash flow provided
by operating activities was partially used to fund financing activities which
consisted of the payment of principal on the Partnership's mortgage notes
payable.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments, unless otherwise indicated. A deficit
is considered significant if it exceeds $250,000 annually or 20% of the
property's rental and service income. The Partnership defines cash flow
generated from its properties as an amount equal to the property's revenue
receipts less property related expenditures, which include debt service
payments. During the six months ended June 30, 1995 and 1994, the American Way
Mall, Storage USA of Norcross and Willow Lawn self-storage facilities all
generated positive cash flow after applicable debt service payments. The
American Way Mall does not have underlying debt. The El Dorado Hills and
Providence Square Apartments generated positive cash flow during the six months
ended June 30, 1995 as compared to marginal cash flow deficits after debt
service for the same period in 1994 due to an increase in rental income and a
decrease in plumbing repairs and carpeting expenditures at the El Dorado Hills
Apartments, and an increase in rental income and a decrease in expenditures
incurred in connection with the repair and renovation program at the Providence
Square Apartments.
While the cash flow of certain of the Partnership's properties has improved,
the General Partner continues to pursue a number of actions aimed at improving
the cash flow of the Partnership's properties including improving property
operating performance and seeking rent increases where market conditions allow.
As of June 30, 1995, the occupancy rates of the Partnership's apartment
complexes and storage facilities ranged from 92% to 98%. The American Way Mall
had an occupancy rate of 54% at June 30, 1995. The Partnership is evaluating
alternative strategies to sell or redevelop this property. Despite improvements
in the local economies and rental markets where certain of the Partnership's
properties are located, the General Partner believes that continued ownership
of many of the properties is in the best interest of the Partnership in order
to maximize potential returns to Limited Partners. Consequently, the
Partnership will continue to own these properties for longer than the holding
period for the assets originally described in the Prospectus.
<PAGE>
Four of the Partnership's properties are owned through the use of third-party
mortgage loan financing and, therefore, the Partnership is subject to the
financial obligations required by such loans. The Partnership's third-party
financing matures in December 1995 and the Partnership is exploring other
third-party financing options. In addition, the Partnership, at its option may
extend the current financing for two successive one year periods.
Pursuant to the terms of the 1992 financing and refinancing agreements on four
of the Partnership's properties, distributions of Net Cash Receipts could not
be made to the General Partner or Limited Partners until certain conditions in
the loan agreements were met, including achievement of specified working
capital levels by the Partnership and required ratios between total net income
at all the collateral properties to total debt service. All of these conditions
have now been met. However, the Partnership will continue to retain cash
reserves as it works to resolve the situation at American Way Mall and the
Partnership's financing issues. In addition, future distributions will also
depend upon cash flow from Partnership properties and proceeds from future
property sales, as to both of which, there can be no assurances.
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 CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits:
(4) Amended and Restated Form of Subscription Agreement set forth as
Exhibit 4.1 to Amendment No. 5 to the Registrant's Registration Statement on
Form S-11 dated August 16, 1985 (Registration No. 2-95910), and Form of
Confirmation regarding Interests in the Partnership 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. 0-14352) are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the six month period ending
June 30, 1995 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended June 30, 1995.
<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 CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Current Income Partners-85, the General
Partner
By: /s/Brian D. Parker
------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Current Income
Partners-85, the General Partner
Date: August 8, 1995
-----------------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2965
<SECURITIES> 0
<RECEIVABLES> 545
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3656
<PP&E> 69074
<DEPRECIATION> 22766
<TOTAL-ASSETS> 50053
<CURRENT-LIABILITIES> 481
<BONDS> 29532
<COMMON> 0
0
0
<OTHER-SE> 20039
<TOTAL-LIABILITY-AND-EQUITY> 50053
<SALES> 0
<TOTAL-REVENUES> 5030
<CGS> 0
<TOTAL-COSTS> 2469
<OTHER-EXPENSES> 1155
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1497
<INCOME-PRETAX> (91)
<INCOME-TAX> 0
<INCOME-CONTINUING> (91)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (91)
<EPS-PRIMARY> (1.59)
<EPS-DILUTED> (1.59)
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