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 March 31, 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.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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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
March 31, 1995 and December 31, 1994
(UNAUDITED)
ASSETS
1995 1994
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Cash and cash equivalents $ 3,058,568 $ 2,872,521
Accounts and accrued interest receivable 554,064 215,118
Deferred expenses, net of accumulated
amortization of $413,336 in 1995 and
$368,754 in 1994 133,182 177,764
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3,745,814 3,265,403
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Investment in real estate, at cost:
Land 10,567,930 10,567,930
Buildings and improvements 58,506,072 58,506,072
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69,074,002 69,074,002
Less accumulated depreciation 22,328,414 21,891,020
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Investment in real estate, net of
accumulated depreciation 46,745,588 47,182,982
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$ 50,491,402 $ 50,448,385
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 80,601 $ 87,997
Due to affiliates 108,085 72,322
Accrued real estate taxes 139,627
Security deposits 296,973 303,114
Mortgage notes payable 29,694,980 29,854,081
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Total liabilities 30,320,266 30,317,514
Partners' capital (57,074 Limited
Partnership Interests issued
and outstanding) 20,171,136 20,130,871
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$ 50,491,402 $ 50,448,385
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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 March 31, 1995 and 1994
(UNAUDITED)
1995 1994
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Income:
Rental $ 2,291,058 $ 2,270,605
Service 167,961 267,005
Interest on short-term investments 54,336 11,359
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Total income 2,513,355 2,548,969
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Expenses:
Interest on mortgage notes payable 746,522 739,299
Depreciation 437,394 503,768
Amortization of deferred expenses 44,582 45,543
Property operating 839,234 1,056,950
Real estate taxes 195,291 239,794
Property management fees 125,875 133,750
Administrative 84,192 108,896
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Total expenses 2,473,090 2,828,000
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Net income (loss) $ 40,265 $ (279,031)
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Net income (loss) allocated to
General Partner $ 403 $ (2,790)
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Net income (loss) allocated to
Limited Partners $ 39,862 $ (276,241)
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Net income (loss) per Limited Partnership
Interest (57,074 issued and outstanding) $ 0.70 $ (4.84)
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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 quarters ended March 31, 1995 and 1994
(UNAUDITED)
1995 1994
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Operating activities:
Net income (loss) $ 40,265 $ (279,031)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation of properties 437,394 503,768
Amortization of deferred expenses 44,582 45,543
Net change in:
Accounts and accrued interest
receivable (338,946) 19,837
Accounts payable (7,396) (31,748)
Due to affiliates 35,763 61,750
Accrued real estate taxes 139,627 412,648
Security deposits (6,141) (3,641)
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Net cash provided by operating activities 345,148 729,126
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Financing activities:
Principal payments on mortgage notes
payable (159,101) (96,110)
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Net cash used in financing activities (159,101) (96,110)
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Net change in cash and cash equivalents 186,047 633,016
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 $ 3,058,568 $ 1,754,416
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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:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1995, and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the quarter ended March 31, 1995 and 1994, the Partnership incurred
interest expense on mortgage notes payable of $746,522 and $739,299 and paid
interest expense of $746,522 and $485,067, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1995 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost: None $108,085
<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
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As a result of improved operations at two of the Partnership's properties, the
Partnership recognized net income for the quarter ended March 31, 1995 as
compared to a net loss for the same period in 1994. Further discussion of the
Partnership's operations are summarized below.
1995 Compared to 1994
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Rental and service income decreased during the quarter ended March 31, 1995 as
compared to the same period in 1994 as a result of a decrease in occupancy at
American Way Mall. This decrease 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 quarter ended March 31, 1995 as compared to the same
period 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 quarter ended March 31, 1995 as
compared to the same period in 1994.
Due to decreases in snow removal, utility and payroll expense at American Way
Mall, decreases in plumbing and roof repairs at El Dorado Hills Apartments, and
the completion of the repair and renovation program at Providence Square
Apartments, property operating expense decreased for the quarter ended March
31, 1995 as compared to the same period in 1994.
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 quarter ended March 31, 1995 as compared to the
same period in 1994.
<PAGE>
Administrative expense decreased during the quarter ended March 31, 1995 as
compared to the same period in 1994 as a result of a decrease in accounting and
printing fees.
Liquidity and Capital Resources
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The cash position of the Partnership increased as of March 31, 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 quarters ended March 31, 1995 and 1994, the American Way
Mall, Providence Square Apartments and the 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 Apartments generated positive cash flow during the quarter
ended March 31, 1995 as compared to a marginal cash flow deficit after debt
service for the same period in 1994 due to increased rental income and
decreased insurance and roof repair expenses.
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 March 31, 1995, the occupancy rates of the Partnership's apartment
complexes and storage facilities ranged from 88% to 98%. The American Way Mall
had an occupancy rate of 55% at March 31, 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.
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 but may be extended, at the Partnership's
option, for two successive one year periods. In addition, the Partnership is
exploring other third-party financing options.
<PAGE>
The Partnership suspended quarterly distributions to Limited Partners in 1991
primarily due to the financing issue regarding the Providence Square
Apartments. Pursuant to the terms of the 1992 financing and refinancing
agreements on four of the Partnership's properties, distributions of Net Cash
Receipts will not be made to the General Partner or Limited Partners until
certain conditions in the loan agreements are 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
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(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 three month period
ending March 31, 1995 is attached hereto.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended March 31, 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
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Current Income Partners-85, the General
Partner
By: /s/Brian Parker
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Brian Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Current Income
Partners-85, the General Partner
Date: May 8, 1995
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<PAGE>
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<PERIOD-END> MAR-31-1995
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<OTHER-SE> 20171
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