SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended Commission File Number
December 31, 1996 2-99673
LINCAM PROPERTIES LTD. SERIES 85
(Exact name of registrant as specified in its charter)
Illinois 36-3377785
(State of Organization) (I.R.S. Employer Identification No.)
125 South Wacker Drive, Suite 3100, Chicago, Illinois 60606
(Address of principal executive office)
Registrant's telephone number, including area code: (312) 443-1477
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- - ------------------- -------------------------------
None 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 ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.
The prospectus of the registrant dated October 23, 1985 as supplemented
April 22, 1986 and filed with the Commission pursuant to Rules 424(b) and
424(c) under the Securities Act of 1933 is incorporated by reference in
Parts I and III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings. . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . 5
PART II
Item 5. Market for the Partnership's Limited
Partnership Interests and
Related Security Holder Matters. . . . . . . 5
Item 6. Selected Financial Data. . . . . . . . . . . 6
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. . . . . . . . . . 7
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 11
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . 31
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . 31
Item 11. Executive Compensation . . . . . . . . . . . 33
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . 34
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 35
PART IV
Item 14. Exhibits, Financial Statement Schedule,
and Reports on Form 8-K. . . . . . . . . . . 35
Signatures . . . . . . . . . . . . . . . . . . . . . . 36
PART I
ITEM 1. BUSINESS
The registrant, LincAm Properties Ltd. Series 85 (the "Partnership")
is a limited partnership formed in August 1985 under the Uniform Limited
Partnership Act of the State of Illinois to invest in income-producing real
estate such as garden apartment complexes and smaller commercial
properties, including neighborhood shopping centers, office/service centers
and industrial buildings, located primarily in the Midwestern, Southwestern
and Southeastern United States. The Partnership sold $25,015,000 in
Limited Partnership Interests (the "Interests") to the public commencing on
October 23, 1985 pursuant to a Registration Statement on Form S-11 under
the Securities Act of 1933 (No. 2-99673).
The Partnership is engaged solely in the business of real estate
investment. A presentation of information about industry segments is not
applicable and would not be material to an understanding of the
Partnership's business taken as a whole.
The Partnership has made the real property investments set forth in
the following table:
<TABLE>
<CAPTION>
NAME, TYPE OF PROPERTY DATE OF
AND LOCATION SIZE PURCHASE TYPE OF OWNERSHIP
- - ---------------------- -------------- -------- --------------------------
<S> <C> <C> <C>
1. Barton Creek Landing 250 units 5/21/86 fee ownership of land and
Apartments improvements (through
Austin, TX joint venture
partnership) (a) (d)
2. Oak View Apartments 124 units 9/30/86 fee ownership of land and
Augusta, GA improvements (b)
3. 5521 Meadowbrook Court 50,000 sq. ft. 1/12/87 fee ownership of land and
Distribution Center g.l.a. improvements (b)
Rolling Meadows, IL
4. Walker's Mark Apartments 164 units 7/29/87 fee ownership of land and
Dallas, TX improvements (b) (c)
5. 1880 Country Farm Road 162,000 sq. ft. 7/1/88 fee ownership of land and
Warehouse/Research Facility improvements (b) (c)
Naperville, IL
<FN>
- - --------------------
(a) Reference is made to Note 3 of Notes to Consolidated Financial Statements filed with this annual
report for a description of the joint venture partnership through which the Partnership has made this real
property investment.
(b) Reference is made to Note 2 of Notes to Consolidated Financial Statements filed with this annual
report for a description of this real property investment.
(c) This property has been sold. Reference is made to Note 2 of Notes to Consolidated Financial Statements
filed with this annual report for a description of the sale of such real property investment.
(d) This property has been sold. Reference is made to Note 3 of Notes to Consolidated Financial Statements
filed with this annual report for a description of the sale of such real property investment.
</TABLE>
In December 1986, the Partnership and its joint venture partner made
additional capital contributions totalling $8,750,000 to the LincAm Barton
Venture, as described in the Partnership's Report on Form 8-K for December
19, 1986, a copy of which report is hereby incorporated herein by
reference. Reference is also made to Note 3 of Notes to Consolidated
Financial Statements filed with this annual report for a further
description of such transaction.
In January 1987, the Partnership acquired the 5521 Meadowbrook Court
Distribution Center, as described in the Partnership's Report on Form 8-K
for December 19, 1986, a copy of which report is hereby incorporated herein
by reference. Reference is also made to Note 2 of Notes to Consolidated
Financial Statements filed with this annual report for a further
description of such transaction.
In July 1987, the Partnership acquired the Walker's Mark Apartments,
as described in the Partnership's Report on Form 8-K for July 29, 1987, a
copy of which report is hereby incorporated herein by reference. Reference
is also made to Note 2 of Notes to Consolidated Financial Statements filed
with this annual report for a further description of such transaction.
In January 1988, the Partnership's fiscal year-end was changed from
October 31, to December 31, as described in the Partnership's Report on
Form 8-K for January 29, 1988, a copy of which report is hereby
incorporated herein by reference.
In July 1988, the Partnership acquired the 1880 Country Farm Road
Facility, as described in the Partnership's Report on Form 8-K filed June
11, 1988, a copy of which report is hereby incorporated herein by
reference. Reference is also made to Note 2 of Notes to Consolidated
Financial Statements filed with this annual report for a further
description of such transaction.
In August 1993, the Partnership sold the Walker's Mark Apartments, as
described in the Partnership Report on Form 8-K/A No. 1 filed August 19,
1993, a copy of which report is hereby incorporated herein by reference.
Reference is also made to Note 2 of Notes to Consolidated Financial
Statements filed with this annual report for further description of such
transaction.
In April 1995, the Joint Venture sold the Barton Creek Landing
Apartments, as described in the Partnership Report on Form 8-K/A No. 1
filed June 22, 1995, a copy of which report is hereby incorporated herein
by reference. Reference is also made to Note 3 of Notes to Consolidated
Financial Statements filed with this annual report for further description
of such transaction.
In September 1996, the Partnership sold the 1880 Country Farm Road
Facility, as described in the Partnership's Report on Form 8-K filed
October 3, 1996, a copy of which report is hereby incorporated herein by
reference. Reference is also made to Note 2 of Notes to Consolidated
Financial Statements filed with this annual report for further description
of such transaction.
The Partnership has no employees.
The terms of the transactions between the Partnership and affiliates
of the General Partners are set forth in Item 11 to which reference is
hereby made for description of such terms and transactions.
ITEM 2. PROPERTIES
The Partnership owns directly the unsold properties referred to in
Item 1 to which reference is hereby made for a description of said
properties.
Included below is a list of approximate occupancy levels by quarter
for the Partnership's investment properties during fiscal years 1995 and
1996:
<TABLE>
<CAPTION>
1995 1996
------------------------------------- ------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barton Creek Landing Apts.
Austin, TX. . . . . . . . . 96% N/A N/A N/A N/A N/A N/A N/A
Oak View Apartments
Augusta, GA . . . . . . . . 99% 88% 87% 85% 96% 88% 77% 82%
5521 Meadowbrook Court
Distribution Center
Rolling Meadows, IL . . . . 100% 100% 100% 100% 100% 50% 50% 50%
1880 Country Farm Road
Naperville, IL. . . . . . . 100% 100% 100% 100% 100% 100% N/A N/A
<FN>
- - --------------------
An "N/A" indicates the property was not owned by the Partnership at the end of the quarter.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
fiscal years 1995 and 1996.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1996, there were 790 record holders of Interests of
the Partnership. There is no public market for Interests and it is not
anticipated that a public market for Interests will develop. Upon request,
the General Partners will endeavor to assist an investor desiring to
transfer his Interests and may utilize the services of broker-dealers in
this regard. The price to be paid for the Interests as well as the
commission to be received by the broker-dealer will be subject to
negotiation by the investor. The General Partners will not redeem or
repurchase Interests.
Reference is made to Item 6 on the following page for a discussion of
cash distributions made to the Limited Partners.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA (a)
LINCAM PROPERTIES LTD. SERIES 85
(A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE
YEARS ENDED DECEMBER 31, 1996, 1995, 1994, 1993, AND 1992
(not covered by Independent Auditors' Report)
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total income. . . . . . . $1,352,610 2,907,891 4,380,033 4,640,228 4,696,992
Gain (loss) on sale of
investment property .. . $ (180,534) 4,768,875 -- 1,300,556 --
Net income. . . . . . . . $ 270,435 3,998,801 1,351,167 2,662,473 1,213,493
Net income per
Interest (b) . . . . . . $ 10.70 158.25 53.47 105.37 48.02
Total assets. . . . . . . $4,976,133 17,709,966 28,452,075 28,923,077 30,187,869
Long-term debt. . . . . . $ -- -- 5,000,000 5,000,000 --
Cash distributions
per Interest (c).. . . . $ 510.00 206.00 70.00 64.00 52.00
========== ========== ========== ========== ==========
<FN>
__________________
(a) The above summary of selected financial data should be read in conjunction with the consolidated
financial statements and the related notes appearing elsewhere in this annual report.
(b) The net income per Interest is based upon the number of Interests outstanding at the end of each year
(25,016).
(c) Prior to 1991, cash distributions to the Limited Partners of the Partnership have not resulted in
taxable income to such Limited Partners and have therefore represented a return of capital for income tax
purposes. In 1991, the Partnership generated taxable income of $8.14 per unit and distributed $36.00 per unit.
In 1992, the Partnership generated taxable income of $36.26 per unit and distributed $52.00 per unit. In 1993,
the Partnership generated taxable income of $54.60 per unit and distributed $64.00 per unit. In 1994, the
Partnership generated taxable income of $47.64 per unit and distributed $70.00 per unit. In 1995, the Partnership
generated taxable income of $224.62 per unit and distributed $206.00 per unit. In 1996, the Partnership generated
taxable income of $67.94 per unit and distributed $510.00 per unit.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On October 23, 1985, the Partnership commenced an offering of
$25,000,000 (subject to increase by up to $15,000,000) of Limited
Partnership Interests pursuant to a Registration Statement on Form S-11
under the Securities Act of 1933. The offering of Limited Partnership
Interests terminated April 15, 1986. A total of 25,015 Interests were
assigned to the public between October 23, 1985 and May 16, 1986.
After deducting selling expenses and other offering costs, the
Partnership had approximately $22,500,000 with which to make investments
in income-producing commercial and residential real property, to pay legal
fees and other costs (including acquisition fees) related to such
investments, and to satisfy working capital requirements. A portion of the
proceeds was utilized to acquire the properties described in Item 1.
At December 31, 1996, the Partnership had short-term investments in
asset management accounts of $341,065 which will be utilized for
distributions to partners and for working capital requirements.
At December 31, 1996, the Partnership had total current assets of
$352,017, current liabilities of $213,758 and a current ratio of 1.65. The
Partnership distributed $70 per Limited Partnership Interest in 1994.
Including a special distribution of the net proceeds from the sale of
Barton Creek Landing Apartments equal to $140 per Limited Partnership
Interest, cash distributions increased to $206 per Limited Partnership
Interest in 1995. Including a special distribution of the net proceeds
from (1) the sale of 1880 Country Farm Road Facility and (2) the collection
of the note receivable equal to $450 per Limited Partnership Interest, cash
distributions increased to $510 per Limited Partnership in 1996.
On September 20, 1996, the Partnership sold the 1880 Country Farm Road
Facility for $6,575,000 in an all cash transaction. As described in Note
2(e) of Notes to Financial Statements, the Partnership received $6,239,950
(net of closing costs). The Partnership distributed the majority of these
proceeds to the partners via a special distribution on October 1, 1996.
On July 2, 1996, the note receivable was prepaid. The Partnership
distributed the proceeds from the collection of this note on October 1,
1996.
On April 12, 1995, the Joint Venture sold Barton Creek Landing
Apartments for $14,871,600 in an all cash transaction. As described in
Notes 3 and 4 of Notes to Consolidated Financial Statements, the
Partnership received approximately $9,060,000 in cash of which $5,000,000
was used to retire the Partnership's bank debt. Of the remaining proceeds,
$140 per limited partnership interest was distributed to the partners via a
special distribution. The remaining cash of approximately $520,000 was
used to pay expenses of the sale or was used for working capital needs.
In April 1995, the Partnership repaid in full its existing bank debt
from the proceeds of the sale of Barton Creek Landing Apartments.
As described in Note 2(d) of Notes to Consolidated Financial
Statements, the Partnership sold Walker's Mark Apartments in Dallas, Texas
for $6,585,000 on August 19, 1993. The Partnership received $911,617 in
cash (net of closing costs) at closing and a note receivable for
$5,485,000. The note provides for monthly payments of interest only in the
amount of $34,281 for 50 months, at which time the note balance is due.
The Partnership used the funds from the sale, together with working capital
reserves, to pay its note payable down to $5,000,000.
The Corporate General Partner will continue to explore selling the two
remaining properties at a time when, from the standpoint of maximizing
value, it makes the most sense.
RESULTS OF OPERATIONS
At December 31, 1996, the Partnership owned two investment properties,
consisting of one apartment complex and a distribution center.
The decrease in rental income for the twelve months ended December 31,
1996 compared to 1995 of approximately $1,322,000 is primarily due to: (1)
no rental income generated at Barton Creek Landing Apartments during 1996
due to it being sold in April 1995 ($640,940); (2) less rental income
generated at the 1880 Country Farm Road Facility ($548,350) due to it being
sold in September 1996; (3) less rental income at Meadowbrook Distribution
Center ($65,700) due to a tenant vacating 50% of the building on May 31,
1996; and (4) less rental income generated at Oak View Apartments ($66,800)
due to lower occupancy.
The decrease in charges to tenants for the twelve months ended
December 31, 1996 compared to 1995 of approximately $57,700 (33.3%) is
primarily due to lower occupancy at the Meadowbrook Distribution Center
with the Partnership being responsible for 50% of the real estate taxes on
operating expenses since June 1, 1996.
Interest income decreased approximately $158,900 (33.6%) for the
twelve months ended December 31, 1996 compared to 1995. This decrease is
primarily attributable to: (1) early repayment of the note receivable
($204,000); and (2) less interest income earned at the joint venture level
($13,000). These decreases have been partially offset by having more funds
held in an interest bearing short-term asset management account ($58,200).
Other income decreased approximately $16,900 (43.3%) for the twelve
months ended December 31, 1996 compared to 1995. This decrease is
primarily due to Barton Creek Landing Apartments being sold in April 1995.
Property operating expenses decreased approximately $228,100 (31.1%)
for the twelve months ended December 31, 1996 compared to 1995. A decrease
of approximately $266,500 is attributable to Barton Creek Landing
Apartments being sold in April 1995. This decrease was partially offset by
increases in operating expenses at Oak View Apartments (approximately
$16,800) and at Meadowbrook Court Distribution Center (approximately
$21,500).
The decrease in depreciation expense of approximately $203,400
(48.7%) for the twelve months ended December 31, 1996 compared to 1995 is
primarily attributable to: (1) the sale of Barton Creek Landing Apartments
(approximately $80,600); and (2) the sale of the 1880 Country Farm Road
Facility (approximately $118,700).
The decrease in interest expense of $128,493 for the twelve months
ended December 31, 1996 compared to 1995 is due to the note payable being
repaid in April 1995.
Management fees paid to affiliates of the General Partner decreased
approximately $49,000 (50.8%) for the twelve months ended December 31, 1996
compared to 1995. This decrease is primarily attributable to: (1) the
sale of Barton Creek Landing Apartments (approximately $32,600); (2) less
rental income collected at Oakview Apartments (approximately $3,100); (3)
less rental income at Meadowbrook Court Distribution Center (approximately
$7,300); and (4) the sale of the 1880 Country Farm Road Facility
(approximately $5,800).
Professional services decreased approximately $14,000 (19.1%) for the
twelve months ended December 31, 1996 compared to 1995. This decrease is
primarily due to a decrease in tax and audit fees incurred by the
consolidated joint venture which was terminated in 1995.
Early repayment of the note payable caused amortization of deferred
expenses to decrease by $14,731 for the twelve months ended December 31,
1996 compared to 1995.
For the twelve months ended December 31, 1996 net operating income was
$270,435 or $10.70 per limited partnership unit. Included in net operating
income is a provision for loss of $180,534 made in June 1996 in
anticipation of the September 1996 sale of the 1880 Country Farm Road
Facility.
The decrease in rental income for the twelve months ended December 31,
1995 compared to 1994 of approximately $1,511,000 (40.5%) is primarily due
to less rental income collected at Barton Creek Landing Apartments
($1,520,300) due to its being sold on April 12, 1995. This decrease was
partially offset by an increase in rental income at the Rolling Meadows
distribution center ($35,100). Rental income at Oak View Apartments also
decreased by approximately $25,800 due to lower occupancy.
The increase in charges to tenants for the twelve months ended
December 31, 1995 compared to 1994 of approximately $47,000 (37.2%) is
attributable to 1) the distribution center being fully occupied in 1995
($10,150) as Samsung America, Inc.'s lease for 50% of the distribution
center commenced March 6, 1994; and 2) increased real estate taxes and
maintenance costs being paid directly by the Partnership and reimbursed by
the tenants ($36,850).
Interest income increased approximately $39,900 (9.2%) for the twelve
months ended December 31, 1995 compared to 1994. This increase is
primarily attributable to increased amounts held in interest bearing short-
term asset management accounts from April 12, 1995 until May 31, 1995.
The decrease in other income of approximately $48,000 (55.2%) is
primarily due to the sale of Barton Creek Landing Apartments.
Property operating expenses decreased approximately $567,300 (43.6%)
for the twelve months ended December 31, 1995 compared to 1994. This
decrease is primarily attributable to the Barton Creek Landing Apartments
being sold ($603,700). This decrease was partially offset by increases in
property operating expenses at Oak View Apartments of approximately $20,600
and at the Rolling Meadows distribution center of approximately $15,800.
The decrease in depreciation expense of approximately $196,500 (32%)
for the twelve months ended December 31, 1995 compared to 1994 is primarily
due to Barton Creek Landing Apartments being sold ($205,375). This
decrease was partially offset by increases in property placed in service
during the second quarter of 1995 at the distribution center ($10,600).
The repayment of the $5,000,000 note payable on April 12, 1995
resulted in a decrease in interest expense of approximately $241,518
(65.3%) for the twelve months ended December 31, 1995 compared to 1994.
Management fees paid to an affiliate of the General Partners decreased
approximately $73,600 (43.3%) for the twelve months ended December 31, 1995
compared to 1994. The sale of the Barton Creek Landing Apartments
accounted for approximately a $77,300 decrease in management fees. This
decrease was partially offset by an increase in management fees due to the
increases in rental income and charges to tenants at the distribution
center.
Professional services have remained essentially flat for the twelve
months ended December 31, 1995 compared to 1994.
General and administrative expenses increased approximately $6,900
(10%) for the twelve months ended December 31, 1995 compared to 1994.
Amortization of deferred expenses decreased approximately $37,300 for
the twelve months ended December 31, 1995 compared to 1994 due to the early
repayment of the note payable. This write-off of deferred expenses is
captioned as a loss on early extinguishment of debt ($71,924) on the
consolidated statement of operations.
For the twelve months ended December 31, 1995, net operating income
was $1,369,137 or $54.18 per limited partnership interest. The partnership
also recognized a gain on sale of investment property, net of minority
interest of $2,861,325 or $113.24 per limited partnership interest. After
an extraordinary loss of $71,924 on early extinguishment of debt, the net
income for the twelve months ended December 31, 1995 was $3,998,801 or
$158.25 per limited partnership interest.
INFLATION
Since inflation levels in the United States have been relatively low
over the ten years the Partnership has been in existence, inflation and
changing prices have had a minimal effect on income from operations.
Inflation in future periods will tend to increase rental income levels
(from leases to new tenants or renewals of existing leases) in accordance
with normal market conditions. Such increases in rental income will tend
to offset the adverse impact that inflation has on property operating
expenses.
Continued inflation could also tend to cause capital appreciation of
the Partnership's investment properties over a period of time as rental
rates and replacement costs of properties continue to increase.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
INDEX
-----
PAGE
----
Independent Auditors' Report. . . . . . . . . . . . . . . 12
Consolidated Balance Sheets, December 31, 1996 and 1995 . 13
Consolidated Statements of Operations, years ended
December 31, 1996, 1995 and 1994. . . . . . . . . . . . 15
Consolidated Statements of Partners' Capital Accounts
(Deficits), years ended December 31, 1996, 1995 and 1994 17
Consolidated Statements of Cash Flows, years ended
December 31, 1996, 1995 and 1994. . . . . . . . . . . . 18
Notes to Consolidated Financial Statements. . . . . . . . 20
SCHEDULE
--------
Consolidated Real Estate and Accumulated Depreciation . . III
SCHEDULES NOT FILED:
All schedules other than those indicated in the above index have been
omitted as the required information is inapplicable or the information is
presented in the financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
LincAm Properties Ltd. Series 85:
We have audited the consolidated financial statements of LincAm
Properties Ltd. Series 85 (a limited partnership) and consolidated venture
as listed in the accompanying index. In connection with our audits of the
consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule 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 the General Partners, 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
LincAm Properties Ltd. Series 85 and consolidated venture as of December
31, 1996 and 1995, and the results of their operations and their cash flows
for each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
As discussed in Note 1 to the financial statements in 1996, the
Partnership changed its method of accounting for Long-Lived Assets and
Long-Lived Assets to Be Disposed Of to conform with Statement of Financial
Accounting Standards No. 121.
/S/ KPMG Peat Marwick LLP
Chicago, Illinois
February 3, 1997
<TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
------
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 350,073 507,111
Prepaid expenses and other. . . . . . . . . . . . . . . . . . . . . . 1,944 150
Receivable from tenant. . . . . . . . . . . . . . . . . . . . . . . . -- 66,695
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . 352,017 573,956
------------ -----------
Note receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 5,485,000
Investment properties, at cost (notes 2 and 3):
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 816,616 2,399,174
Building and improvements . . . . . . . . . . . . . . . . . . . . . 5,702,499 12,016,137
------------ -----------
6,519,115 14,415,311
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . (1,908,341) (2,920,741)
------------ -----------
Total investment properties,
net of accumulated depreciation . . . . . . . . . . . . . 4,610,774 11,494,570
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,342 156,440
------------ -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . $ 4,976,133 17,709,966
============ ===========
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL (DEFICITS)
--------------------------------------------
1996 1995
------------ -----------
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 44,411 30,906
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 1,943 --
Funds held for others . . . . . . . . . . . . . . . . . . . . . . . -- 150,879
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . 146,250 118,000
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . 21,154 31,211
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . 213,758 330,996
Partners' capital (deficits) (note 1):
General Partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 2,000 2,000
Allocated portion of cumulative net income. . . . . . . . . . . . 105,817 103,112
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (283,009) (154,139)
------------ -----------
(175,192) (49,027)
------------ -----------
Limited Partners:
Interests of $1,000. Authorized 40,001 Interests;
issued and outstanding 25,016 Interests . . . . . . . . . . . . 22,479,645 22,479,645
Allocated portion of cumulative net income. . . . . . . . . . . . 10,531,997 10,264,267
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (28,074,075) (15,315,915)
------------ -----------
4,937,567 17,427,997
------------ -----------
Total partners' capital . . . . . . . . . . . . . . . . . . 4,762,375 17,378,970
------------ -----------
Total liabilities and partners' capital . . . . . . . . . . $ 4,976,133 17,709,966
============ ===========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . $ 900,574 2,222,426 3,733,479
Charges to tenants. . . . . . . . . . . . . . . . 115,626 173,299 126,333
Interest income . . . . . . . . . . . . . . . . . 314,371 473,252 433,354
Other income. . . . . . . . . . . . . . . . . . . 22,045 38,914 86,867
------------ ------------ ------------
Total income. . . . . . . . . . . . . . . 1,352,616 2,907,891 4,380,033
------------ ------------ ------------
Expenses:
Property operating expenses . . . . . . . . . . . 504,861 732,961 1,300,283
Depreciation. . . . . . . . . . . . . . . . . . . 213,998 417,432 613,936
Interest expense. . . . . . . . . . . . . . . . . -- 128,493 370,010
Management fees paid to affiliate
of general partner (note 7) . . . . . . . . . . 47,423 96,386 170,002
Professional services . . . . . . . . . . . . . . 59,032 72,990 70,090
Amortization of deferred expenses . . . . . . . . -- 14,731 51,993
General and administrative. . . . . . . . . . . . 76,333 75,761 68,859
Provision for loss on sale of investment
property. . . . . . . . . . . . . . . . . . . . 180,534 -- --
------------ ------------ ------------
Total expenses. . . . . . . . . . . . . . 1,082,181 1,538,754 2,645,173
------------ ------------ ------------
Operating income. . . . . . . . . . . . . 270,435 1,369,137 1,734,860
Gain on sale of investment
property (note 3) . . . . . . . . . . . . . . . . -- 4,768,875 --
Venture partner's share of venture's
operations and sale (note 3). . . . . . . . . . . -- (2,067,287) (383,693)
------------ ------------ ------------
Net income before extraordinary item. . . 270,435 4,070,725 1,351,167
Extraordinary item:
Loss on early extinguishment of debt. . . . . . -- 71,924 --
------------ ------------ ------------
Net income. . . . . . . . . . . . . . . . $ 270,435 3,998,801 1,351,167
============ ============ ============
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1996 1995 1994
------------ ------------ ------------
Net income per limited
partnership interest:
Before extraordinary item. . . . . . . $ 10.70 161.10 53.47
Extraordinary item. . . . . . . . . . . . -- 2.85 --
------------ ------------ ------------
Net income. . . . . . . . . . . . . $ 10.70 158.25 53.47
============ ============ ============
Cash distributions per limited
partnership interest. . . . . . . . . . $ 510.00 206.00 70.00
============ ============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (25,016 INTERESTS)
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET OF
CONTRI- NET CASH OFFERING NET CASH
BUTIONS INCOME DISTRIBUTIONS TOTAL COSTS INCOME DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficit) at
December 31,
1993 . . . . . $2,000 49,613 (84,398) (32,785) 22,479,645 4,967,798 (8,411,499) 19,035,944
Net income. . . .-- 13,511 - 13,511 -- 1,337,656 -- 1,337,656
Cash distri-
butions. . . . .-- -- (17,688) (17,688) -- -- (1,751,120) (1,751,120)
------ -------- -------- ---------- ---------- ---------- ----------- ----------
Balance
(deficit) at
December 31,
1994 . . . . . .2,000 63,124 (102,086) (36,962) 22,479,645 6,305,454 (10,162,619) 18,622,480
Net income. . . .-- 39,988 - 39,988 -- 3,958,813 -- 3,958,813
Cash distri-
butions. . . . .-- -- (52,053) (52,053) -- -- (5,153,296) (5,153,296)
------ -------- -------- ---------- ---------- ---------- ----------- ----------
Balance
(deficit) at
December 31,
1995 . . . . . .2,000 103,112 (154,139) (49,027) 22,479,645 10,264,267 (15,315,915) 17,427,997
Net income. . . .-- 2,705 -- 2,705 -- 267,730 -- 267,730
Cash distri-
butions. . . . .-- -- (128,870) (128,870) -- -- (12,758,160)(12,758,160)
------ -------- -------- ---------- ---------- ---------- ----------- ----------
Balance
(deficit) at
December 31,
1996 . . . . . .$2,000 105,817 (283,009) (175,192) 22,479,645 10,531,997 (28,074,075) 4,937,567
====== ======== ======== ========== ========== ========== =========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net income. . . . . . . . . . . . . . . . . . . . $ 270,435 3,998,801 1,351,167
Adjustments to reconcile net income
to net cash provided by operating activities:
Straight-line of rent adjustment. . . . . . . -- 52,041 29,214
Loss on early extinguishment of debt. . . . . -- 71,924 --
(Gain) loss on sale of investment property. . 180,534 (4,768,875) --
Depreciation. . . . . . . . . . . . . . . . . 213,998 417,432 613,936
Amortization. . . . . . . . . . . . . . . . . -- 14,731 51,993
Venture partner's share of venture's
operations. . . . . . . . . . . . . . . . . -- 2,067,287 383,693
Other . . . . . . . . . . . . . . . . . . . . 373,030 -- --
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses
and other . . . . . . . . . . . . . . . . . (1,794) 37,751 (1,517)
(Increase) decrease in receivable from tenant 66,695 (5,016) (61,679)
(Increase) decrease in other assets . . . . . 35,978 96,375 (3,483)
Increase (decrease) in accounts payable . . . 13,505 (46,157) 12,348
Increase in accrued expenses. . . . . . . . . 1,943 -- --
Increase (decrease) in accrued
interest payable. . . . . . . . . . . . . . -- (14,383) 3,493
Increase (decrease) in funds held for others. (150,879) 24,293 13,282
Increase (decrease) in accrued real
estate taxes. . . . . . . . . . . . . . . . 28,250 (309,116) 14,446
Increase (decrease) in security deposits. . . (10,057) (82,017) 1,256
Decrease in unearned income . . . . . . . . . -- (1,952) (1,879)
----------- ----------- -----------
Total adjustments . . . . . . . . . . . . 751,203 (2,445,682) 1,055,103
----------- ----------- -----------
Net cash provided by
operating activities. . . . . . . . . . 1,021,638 1,553,119 2,406,270
----------- ----------- -----------
Cash flows from (for) investing activities:
Additions to buildings and improvements . . . . . (16,596) (21,332) (159,402)
Net cash proceeds from sale of investment
property. . . . . . . . . . . . . . . . . . . . 6,239,950 14,530,759 --
Collection of note receivable . . . . . . . . . . 5,485,000 -- --
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . 11,708,354 14,509,427 (159,402)
----------- ----------- -----------
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
Cash flows for financing activities:
Cash distributions to Limited Partners. . . . . . (12,758,160) (5,153,296) (1,751,120)
Cash distributions to General Partners. . . . . . (128,870) (52,053) (17,688)
Cash distributions to Venture Partner . . . . . . -- (6,173,516) (480,000)
Repayments of notes payable . . . . . . . . . . . -- (5,000,000) --
----------- ----------- -----------
Net cash used in financing activities . . (12,887,030) (16,378,865) (2,248,808)
----------- ----------- -----------
Net decrease in cash and cash equivalents . . . . . (157,038) (316,319) (1,940)
Cash and cash equivalents at beginning of year. . . 507,111 823,430 825,370
----------- ----------- -----------
Cash and cash equivalents at end of year. . . . . . $ 350,073 507,111 823,430
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . $ -- 142,876 366,517
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(1) ORGANIZATION AND BASIS OF ACCOUNTING
The Partnership was formed August 9, 1985 by filing a Certificate of
Limited Partnership under the Uniform Limited Partnership Act of the State
of Illinois. The initial capital was $3,000 including capital
contributions of $2,000 by the General Partners and the subscription and
payment for one Limited Partnership Interest of $1,000. The Agreement of
Limited Partnership authorized the issuance of up to 25,000 additional
Limited Partnership Interests (subject to increase by up to 15,000
Interests) pursuant to a public offering. A total of 25,015 Interests were
subscribed for and issued between October 23, 1985 and May 16, 1986.
The accompanying consolidated financial statements include the
accounts of the Partnership and its consolidated venture, LincAm Barton
Venture (Note 3). The effect of all transactions between the Partnership
and the Venture has been eliminated.
For purposes of the statement of cash flows, the Partnership considers
all investments purchased with original maturity of three months or less to
be cash equivalents.
The Partnership records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying financial statements have been prepared from such records
after making appropriate adjustments to reflect the Partnership's accounts
in accordance with generally accepted accounting principles (GAAP). Such
adjustments are not recorded on the records of the Partnership. The net
effect of these items is summarized below:
<TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<CAPTION>
1996 1995
------------------------------ ------------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . $ 4,976,133 4,989,277 17,709,966 17,320,863
Partners' capital (deficits):
General partners. . . . . . . . . $ (175,192) (213,759) (49,027) (149,223)
Limited partners. . . . . . . . . $ 4,937,567 4,988,898 17,427,997 16,012,930
Net income:
General partners. . . . . . . . . $ 2,705 64,334 39,988 56,757
Limited partners. . . . . . . . . $ 267,730 1,734,128 3,958,813 5,618,979
=========== =========== =========== ===========
</TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The net income per Limited Partnership Interest as presented is based
upon the Limited Partnership Interests outstanding at the end of the
periods (25,016).
No provision for Federal income taxes has been made as any liability
for such taxes is that of the partners rather than the Partnership.
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
On January 1, 1996, the Partnership adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which
changes the Partnership's current method of accounting for its real estate
property investments when circumstances indicate that carrying amount of
the property may not be recoverable. Properties held for sale will
continue to be reflected at the lower of historical cost or estimated fair
value less anticipated selling costs. In addition, properties held for
sale will no longer be depreciated.
Losses in carrying values of investment assets are provided by
management when the losses become apparent and the investment asset is
considered impaired. Management evaluates its investment properties at
least quarterly to assess whether any impairment indications are present,
comparing undiscounted future cash flows with the carrying amount of the
asset. If any investment asset is considered impaired, a loss is provided
to reduce the carrying value of the property to its estimated value.
The 1880 Country Farm Road facility was sold in September, 1996. In
anticipation of the sale, the Partnership, in June 1996, made a provision
for loss of $180,534 to reduce the carrying amount of the facility to its
estimated value. Management believes that no other assets are impaired;
therefore, no other such losses have been required to be recognized or
provided for in the accompanying financial statements.
(2) INVESTMENT PROPERTIES
(a) General
The Partnership has acquired, either directly or through a joint
venture (Note 3), three apartment complexes, a distribution center, and a
warehouse/research facility. One apartment complex was sold in 1993.
Another apartment complex was sold in 1995. The warehouse/research
facility was sold in 1996. Both properties owned at December 31, 1996 were
completed and in operation.
Depreciation on the investment properties acquired has been provided
over the estimated useful lives of five to forty years using the straight-
line method.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(b) Oak View Apartments
On September 30, 1986, the Partnership acquired for $3,604,460 the Oak
View Apartments, a 124 unit apartment complex located in the Augusta,
Georgia metropolitan area and title to the approximately twenty acre parcel
of land on which the complex is situated.
An affiliate of the General Partners of the Partnership manages the
apartment complex for a fee equal to 5% of the gross revenue of the
property.
(c) 5521 Meadowbrook Court Distribution Center
On January 12, 1987, the Partnership acquired for $2,492,500 an
approximately 50,000 square foot distribution center and the approximately
110,000 square foot parcel of land on which the building is situated. The
property is located at 5521 Meadowbrook Court in Rolling Meadows, Illinois,
and has been leased to Komori America , Inc. since February 11, 1991.
Komori America, Inc. has entered into a thirty-two month lease agreement
which commenced August 16, 1993. Under the terms of the lease the tenant
occupied approximately 41.67% of the distribution center and paid base rent
of $4.85 per square foot in year one. The base rent increased to $4.90 on
August 1, 1994. The terms of the lease also provided that the tenant be
responsible for its proportionate share of all operating expenses,
including real estate taxes during the term of the lease. Komori America,
Inc. amended their lease effective February 1, 1994 to occupy an additional
4,167 square feet (8.33%) for $2.75 per square foot. Komori America,
Inc.'s lease expired on May 31, 1996 at which time they vacated one-half of
the distribution center they had occupied.
On January 11, 1994, the Partnership leased the remaining 25,000
square feet of the distribution center to Samsung America, Inc. The
thirty-eight month lease commenced March 6, 1994 and provides for an annual
base rent of $3.75 per square foot in year one. The terms of the lease
provide for three percent annual increases in the base rent. The terms of
the lease also provide that the tenant be responsible for their
proportionate share of all operating expenses, including real estate taxes,
during the term of the lease. On November 29, 1996, the tenant amended the
lease to occupy an additional 25,000 square feet and to extend the term of
the lease until July 31, 2002. Effective March 1, 1997, the tenant will
occupy the entire distribution center and will be responsible for all
operating expenses including insurance and real estate taxes during the
term of the lease. The base rent for the original 25,000 square feet
increased to $4.10 per square foot on March 1, 1997. Under the terms of
the First Amendment to Lease the base rent for the additional 25,000 square
feet will be $4.40 per square foot commencing March 1, 1997. Commencing
June 1, 1997, the tenant will pay a base rent of $4.40 for the entire
50,000 square feet. The lease provides for 3% annual increases in base
rent effective March 1.
An affiliate of the General Partners manages the distribution center
for a fee equal to 3% of the gross revenue for the property.
(d) Walker's Mark Apartments
On July 29, 1987, the Partnership acquired for $5,950,000 the Walker's
Mark Apartments, a 164 unit apartment complex located in Dallas, Texas, and
title to the approximately seven acre parcel of land on which the complex
is situated.
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
On August 19, 1993, the Partnership sold this apartment complex for
$6,585,000. The Partnership received $911,617 in cash (after closing costs
and commissions) and a note receivable for $5,485,000 which was secured by
a first mortgage on the property. Through June 1996, the Partnership
received monthly payments of interest only, at an annual rate of 7.5% with
the note balance due October 1, 1997. Pursuant to the note agreement the
buyer is required to deposit with the seller monthly payments for real
estate taxes.
On July 2, 1996, the buyer prepaid the note in full. The Partnership
distributed the proceeds from the collection of the note on October 1,
1996.
(e) 1880 Country Farm Road Facility
On July 1, 1988, the Partnership acquired for $7,840,000 an
approximately 162,000 square foot office and warehouse/research building
and title to the approximately 354,000 square foot parcel of land on which
the building is situated. The property is located at 1880 Country Farm
Road in Naperville, Illinois, and was leased to Babson Bros. Co. for a ten-
year lease term which commenced September 1987. The terms of the lease
provided that the tenant be responsible for payment of all operating
expenses, including real estate taxes, during the term of the lease.
An affiliate of the General Partners managed the property for a fee
equal to 1% of the gross revenue of the property.
On September 20, 1996, the Partnership sold this facility and the land
on which the building is situated for $6,575,000 in an all cash
transaction. The Partnership received $6,239,950 (after closing costs and
commissions). The Partnership used these proceeds and the proceeds from
the collection of the $5,485,000 note from the sale of the Walker's Mark
Apartments to make a special distribution of $450 per limited partnership
interest on October 1, 1996.
(3) VENTURE AGREEMENT - LINCAM BARTON VENTURE
On May 21, 1986, the Partnership entered into a joint venture
agreement with an affiliate of the General Partners of the Partnership to
acquire a 60% interest in Barton Creek Landing Apartments, a 250 unit
apartment complex located in Austin, Texas, and title to the approximately
nineteen acre parcel of land on which the complex is situated. The
Partnership and its venture partner made initial cash capital contributions
of $2,496,000 and $1,664,000, respectively, to the joint venture
partnership (the "Joint Venture"), which also received a loan from the
Partnership's venture partner in the amount of $8,750,000. These funds
were used to pay the property's purchase price of $12,500,000. On December
22, 1986, the Joint Venture replaced the loan with additional equity
totalling $8,750,000 contributed to the Joint Venture by the Partnership
and its venture partner in proportion to their respective ownership
percentages.
Under the terms of the Joint Venture Agreement, all costs incurred by
the Joint Venture and all profits and losses and cash distributions will be
shared by the Partnership and its venture partner in proportion to their
ownership percentages (60% and 40%, respectively).
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
On April 12, 1995, the Joint Venture sold this apartment complex for
$14,871,600 in an all cash transaction. The Partnership received
approximately $9,060,000 in cash distributions from the joint venture which
was used to repay debt (see Note 4 of Notes to Consolidated Financial
Statements) and made a special distribution of $3,537,616 or $140 per
limited partnership interest.
(4) NOTE PAYABLE
The Partnership paid the $5,000,000 note which was owed to a bank in
full in April 1995 upon closing of the sale of the Barton Creek Landing
Apartments.
(5) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and
losses of the Partnership from operations for income tax purposes through
the initial 1986 admission date of additional limited partners (April 23,
1986) were allocated 99% to the General Partners and 1% to the initial
Limited Partner. Thereafter, the agreement provides that net profits and
losses of the Partnership from operations are allocated 99% to the Limited
Partners and 1% to the General Partners. Profits from the sale of
investment properties will be allocated first to the General Partners in an
amount equal to the greater of the General Partners' share of cash
distributions from the proceeds of any such sale (as described below) or 1%
of the total profits from any sale, plus an amount which will reduce the
General Partners' capital accounts' (deficits), if any, to a level
consistent with the future gain anticipated to be realized from the sale of
properties. Losses from the sale of investment properties will be
allocated 1% to the General Partners. The remaining profits and losses
from sales of the Partnership's properties will be allocated to the Limited
Partners.
Net profits or losses in the accompanying financial statements are
allocated 99% to the Limited Partners and 1% to the General Partners.
Differences may therefore result between allocations among the partners on
the financial statement basis and the tax basis.
The General Partners are not required to make any additional capital
contributions except under certain limited circumstances upon dissolution
and termination of the Partnership. "Net cash receipts" from operations of
the Partnership are allocated (a) 99% to the Limited Partners and 1% to the
General Partners, until the Limited Partners have received a non-cumulative
10% per annum return on their Adjusted Capital Contributions (which is
equal to their Capital Contributions reduced by any previous distributions
of sale or repayment proceeds to them) and (b) then, 90% to the Limited
Partners and 10% to the General Partners. Distributions of "sale proceeds"
and "repayment proceeds" are to be allocated 99% to the Limited Partners
and 1% to the General Partners until receipt by the Limited Partners of
their initial contributed capital plus a cumulative cash return of 10% per
annum (on a non-compounded basis) on their Adjusted Capital Contributions.
Thereafter, distributions of "sale proceeds" and "repayment proceeds" are
to be allocated to the General Partners until the General Partners have
received distributions in an amount equal to 3% of the gross sales price of
all properties sold, subject to certain limitations, with the balance
distributable 85% to the Limited Partners and 15% to the General Partners.
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(6) LEASES
At December 31, 1996, the Partnership's principal assets are one
apartment complex and one distribution center. The Partnership has
determined that all leases relating to these properties are properly
classified as operating leases; therefore, rental income is reported when
earned and the cost of each of the properties, excluding cost of land, is
depreciated over the estimated useful lives.
Apartment complex leases in effect at December 31, 1996 are generally
for a term of one year or less and provide for total annual rents of
approximately $561,840.
The commercial lease for the distribution center commenced March 6,
1994, was amended in November 1996 effective March 1, 1997, and provides
for scheduled rent increases of 3% per annum during the term of the lease.
Generally accepted accounting principles require that rental income be
recorded for the period of occupancy using the effective monthly rent,
which is the average monthly rent for the entire period of occupancy during
the term of the lease. Included in other assets at December 31, 1996, 1995
and 1994 is deferred rent receivable of $0, $141,461 and $193,502,
respectively, and included in rental income for the years ended December
31, 1996, 1995 and 1994 is $0, $52,041 and $29,214, respectively, related
to amortization of deferred rent receivable.
The commercial lease call for minimum lease payments to be received in
the future as follows:
1997. . . . . . . . . . . . . . $ 198,042
1998. . . . . . . . . . . . . . 225,417
1999. . . . . . . . . . . . . . 232,333
2000. . . . . . . . . . . . . . 239,333
2001. . . . . . . . . . . . . . 246,333
2002. . . . . . . . . . . . . . 147,500
----------
Total . . . . . . . . . . . $1,288,958
==========
Cost and accumulated depreciation of the leased assets are summarized
as follows at December 31, 1996:
Apartment complex:
Cost. . . . . . . . . . . . .$ 3,842,443
Accumulated depreciation. . . (1,306,419)
-----------
2,536,024
-----------
Distribution center:
Cost. . . . . . . . . . . . . 2,676,672
Accumulated depreciation. . . (601,922)
-----------
2,074,750
-----------
Total . . . . . . . . . . .$ 4,610,774
===========
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)
(7) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the
Partnership to the Corporate General Partner and its affiliates as of and
for the years ended December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994
------- ------- -------
Property management fees. . . . $47,423 96,386 170,002
Out-of-pocket expenses. . . . . $72,726 70,502 69,822
======= ======= =======
<TABLE>
SCHEDULE III
LINCAM PROPERTIES LTD. SERIES 85
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<CAPTION>
COSTS CAPITALIZED
INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (a) ACQUISITION AT CLOSE OF PERIOD (b)
---------------------- --------------------------------------------------------
BUILDINGS BUILDINGS BUILDINGS
AND AND AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL
- - ----------- ----------- -------- ------------ ------- ------------ --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Augusta, GA . . . .$ -- 254,078 3,406,949 -- 181,416 254,078 3,588,365 3,842,443
Rolling Mdws, IL. . -- 562,538 1,998,815 -- 115,319 562,538 2,114,134 2,676,672
---------- ------- ---------- ------ -------- -------- ---------- ----------
Total . . . . .$ -- 816,616 5,405,764 -- 296,735 816,616 5,702,499 6,519,115
========== ======= ========== ====== ======== ======== ========== ==========
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
LINCAM PROPERTIES LTD. SERIES 85
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN INCOME
ACCUMULATED DATE OF DATE STATEMENT
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED
- - ----------- ------------ ------------ ---------- ---------------
<S> <C> <C> <C> <C>
Augusta, GA . . . . . . . 1,306,419 1986 9/30/86 5-40 years
Rolling Mdws, IL. . . . . 601,922 1986 1/12/87 5-40 years
----------
Total . . . . . . . . $1,908,341
==========
<FN>
(a) The initial cost represents the original purchase price of the properties, including closing costs.
(b) The aggregate cost of the above real estate at December 31, 1996 for Federal Tax purposes is $6,519,115.
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
LINCAM PROPERTIES LTD. SERIES 85
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
<CAPTION>
(C) Reconciliation of real estate owned:
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . $ 14,415,311 27,241,049 27,081,647
Additions during period. . . . . . . . . . . . . 16,596 16,291 159,402
Less dispositions during period. . . . . . . . . (7,912,792) (12,842,029) --
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . $ 6,519,115 14,415,311 27,241,049
============ ============ ============
(C) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . $ 2,920,741 5,588,495 4,974,559
Additions during period. . . . . . . . . . . . . 213,998 417,432 613,936
Less dispositions during period. . . . . . . . . (1,226,398) (3,085,186) --
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . $ 1,908,341 2,920,741 5,588,495
============ ============ ============
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of auditors during fiscal years of 1996, 1995 or
1994.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is owned 50% by Amli
Realty Co., a Delaware Corporation, and 50% by Lincoln National
Corporation, a publicly held, diversified financial services company. Both
companies are affiliates of the officers and directors of LincAm Associates
Ltd., the Associate General Partner of the Partnership. The Corporate
General Partner has responsibility for all aspects of the Partnership's
operations, subject to the requirement that purchases and sales of real
property must be approved by the Managing General Partners of the Associate
General Partner of the Partnership. The relationship of the Corporate
General Partner to its affiliates is described under the caption "Conflicts
of Interest" at pages 15-20 of the Prospectus, a copy of which description
is filed herewith and hereby incorporated herein by reference.
The directors, executive officers and other officers of the Corporate
General Partner of the Partnership and key officers of certain affiliates
are as follows:
NAME OFFICE
---- ------
Gregory T. Mutz. . . . . . . . . . . Chairman and Director, and
President, Amli Management
Company
John E. Allen. . . . . . . . . . . . President and Director
Lawrence T. Kissko . . . . . . . . . Vice President,
Assistant Secretary
and Director
Marybeth Montgomery. . . . . . . . . Vice President,
Assistant Secretary
and Director
Charles C. Kraft . . . . . . . . . . Treasurer
Charlotte A. Sparrow . . . . . . . . Secretary
Susan S. Bersh . . . . . . . . . . . Investor Relations
Coordinator
There are no family relationships among any of the foregoing directors
or officers. All directors and officers of the Corporate General Partner
have been elected to serve until the next annual meeting of its
stockholders to be held in 1997.
The business experience of each director and officer of the Corporate
General Partner of the Partnership is as follows:
Gregory T. Mutz (age 51) is the Chairman and a Director of LincAm
Properties, Inc. Mr. Mutz is also the President of Amli Management
Company. Mr. Mutz is also the Chairman of Amli Realty Co., a Trustee and
the Chairman of Amli Residential Properties Trust, a Director of Baldwin &
Lyons, Inc., a property and casualty insurance company, a Director of
Unique Indoor Comfort, Inc., a Chicago headquartered heating and air
conditioning contracting firm, and a general partner in numerous real
estate partnerships. Prior to the above associations, Mr. Mutz was an
officer with White, Weld & Co. Incorporated, a New York-based investment
banking firm (1976-78); and was associated with the law firm of Mayer,
Brown & Platt (1973-76). Mr. Mutz received a B.A. degree from DePauw
University in 1967 and a J.D. from the University of Michigan Law School in
1973.
John E. Allen (age 60) is the President and a Director of LincAm
Properties, Inc. Mr. Allen is also the President of Amli Realty Co. and a
Trustee and Vice Chairman of Amli Residential Properties Trust. Prior to
joining Amli, he was a partner in the law firm of Mayer, Brown & Platt
(1964-81). Mr. Allen received a B.S. degree in Business from Indiana
University in 1961 and a J.D. from the Indiana University School of Law in
1964. While with Mayer, Brown & Platt, Mr. Allen was extensively involved
with structuring international business transactions and the equity
financing of real estate, including hotels, apartments, warehouses and
office buildings.
Lawrence T. Kissko (age 48) is a Vice President, an Assistant
Secretary and Director of LincAm Properties, Inc. He is also Senior Vice
President and Director of Real Estate Investment of Lincoln National
Investment Management Company. In this position Mr. Kissko is responsible
for the management of the real estate production effort. Prior to joining
Lincoln in 1983, Mr. Kissko was associated with Union Mutual Life Insurance
Company of Portland, Maine. Prior to that, he was associated with
Massachusetts Mutual Life Insurance Company. With both companies, Mr.
Kissko was responsible for real estate investment activities. Mr. Kissko
holds a Master's degree in Business Administration from State University of
New York at Albany, and a Bachelor's degree in Management from Rensselaer
Polytechnic Institute in Troy, New York.
Marybeth Montgomery (age 53) is a Vice President, an Assistant
Secretary and Director of LincAm Properties, Inc. and is an Assistant Vice
President and Director of Real Estate Asset Management at Lincoln National
Corporation. Ms. Montgomery is responsible for Lincoln's apartment and
nursing home portfolio coast to coast. Ms. Montgomery joined Lincoln in
1983 after serving as a regional property manager for Gene B. Glick of
Indiana. She attended Indiana University and is a Certified Property
Manager, Certified Apartment Manager and holds a real estate broker's
license.
Charles C. Kraft (age 49) is Treasurer of LincAm Properties, Inc. He
is also Treasurer of Amli Realty Co. and Treasurer and Principal Accounting
Officer of Amli Residential Properties Trust. Prior to joining Amli, he
was associated with KPMG Peat Marwick in that firm's national real estate
practice (1972-83). He is a Certified Public Accountant and a former
Director of the Chicago Board of Realtors. Mr. Kraft is a 1968 graduate of
Wabash College.
Charlotte A. Sparrow (age 38) is the Secretary of LincAm Properties,
Inc. She is also Secretary of Amli Realty Co. and Secretary of Amli
Residential Properties Trust. Prior to joining Amli, Ms. Sparrow was a
paralegal with the law firm of Mayer, Brown & Platt (1982-1993). Ms.
Sparrow received a B.A. from Ripon College in 1980.
Susan S. Bersh (age 33) is Investor Relations Coordinator for LincAm
Properties, Inc. She is also the Marketing and Communications Coordinator
for Amli Realty Co. and a Vice President and the Investor Relations and
Public Relations Director for Amli Residential Properties Trust. Ms. Bersh
is a Registered Representative for Direct Participation Programs and has
passed the Uniform Securities Agent State Law Exam. She graduated from the
University of Illinois with a B.A. degree in Economics in 1985.
All of the outstanding shares of the Corporate General Partner are
owned 50% by Amli Realty Co. and 50% by Lincoln National Corporation. The
Corporate General Partner is not prohibited from paying dividends to its
shareholders. The Partnership Agreement provides that the purchasers of
Interests will acquire no interest in the stock or assets of the Corporate
General Partner or in any proceeds of any sales thereof (which sales are
not restricted in any respect), by virtue of acquiring or owning Interests
and becoming Limited Partners in the Partnership.
Purchasers of Interests will not participate in the election of
directors of the Corporate General Partner. Vacancies on the Board of
Directors of the Corporate General Partner occurring between annual
meetings may be filled by a majority of the remaining directors. Directors
of the Corporate General Partner may be paid fees by the Corporate General
Partner, but no such fees will be charged to the Partnership.
ITEM 11. EXECUTIVE COMPENSATION
Officers and directors of the Corporate General Partner receive no
current or proposed direct remuneration in such capacities. The
Partnership is required to pay a management fee to the Corporate General
Partner and the General Partners are entitled to receive a share of cash
distributions, when and as cash distributions are made to the Limited
Partners, and a share of profits or losses which are described under the
captions "Compensation and Fees" at pages 10-14, "Cash Distributions" at
pages 69-70 and "Allocation of Profits or Losses for Tax Purposes" at page
70 of the Prospectus and at pages A-7 to A-12 of the Partnership Agreement,
included as an exhibit to the prospectus, a copy of which descriptions is
filed herewith and is hereby incorporated herein by reference. Reference
is also made to Note 5 of Notes to Consolidated Financial Statements filed
with this annual report for a description of such distributions and
allocations. In fiscal 1996, the General Partners received distributions
of $128,870.
The Partnership is permitted to engage in various transactions
involving affiliates of the General Partners of the Partnership, as
described under the captions "Compensation and Fees" at pages 10-14, and
"Conflicts of Interest" at pages 15-20 of the Prospectus and at pages A-15
to A-23 of the Partnership Agreement, included as an exhibit to the
Prospectus, a copy of which descriptions is filed herewith and hereby
incorporated herein by reference. The relationship of the Corporate
General Partner (and its directors and officers) to its affiliates is set
forth in Item 10.
In fiscal 1996, Amli Management Co., an affiliate of the General
Partners, earned property management fees aggregating $29,773 for its
services to the Partnership in connection with the operations of Oak View
Apartments in Augusta, Georgia.
The General Partners of the Partnership or their affiliates may be
reimbursed for their direct expenses or out-of-pocket expenses relating to
the administration of the Partnership and the acquisition and operating of
the Partnership's real property investments. In fiscal 1996, affiliates of
the General Partners of the Partnership were reimbursed for such out-of-
pocket expenses in the amount of $72,726 all of which was repaid as of
December 31, 1996.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The following persons or groups are known by the Partnership to own beneficially more than 5% of the
outstanding Interests of the Partnership:
<CAPTION>
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- - -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership LNL-IPD Par Life Portfolio 12,629 50.48%
Interests 1300 S. Clinton Street Interests directly
Fort Wayne, Indiana 46801
Limited Partnership LincAm Associates Ltd. 6,237 24.93%
Interests 125 South Wacker Drive Interests directly
Suite 3100
Chicago, Illinois 60606
</TABLE>
<TABLE>
(b) The officers and directors of the Corporate General Partner of the Partnership own as a group the
following Interests of the Partnership:
<CAPTION>
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- - -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership None No Interest directly 0%
Interests
<FN>
No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.
All of the outstanding shares of the Corporate General Partner of the Partnership are owned by an affiliate
of its officers and directors as set forth in Item 10.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date
result in a change in control of the Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Corporate General Partner, affiliates, or their management other than
those described in Items 10 and 11.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements
filed with this annual report).
(2) Exhibits: 27. Financial Data Schedule.
(b) No Reports on Form 8-K were required or filed since the beginning
of the last quarter of the period covered by this report.
No annual report or proxy material for the fiscal year 1996 has
been sent to the Partners of the Partnership. An annual report will be
sent to the Partners subsequent to this filing and the Partnership will
furnish copies of such report to the commission when it is sent to the
Partners.
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.
LINCAM PROPERTIES LTD. SERIES 85
By: LINCAM PROPERTIES, INC.
Corporate General Partner
By: /S/ JOHN E. ALLEN
John E. Allen
President of Corporate
General Partner
Date: March 13, 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.
By: LINCAM PROPERTIES, INC.
Corporate General Partner
By: /S/ GREGORY T. MUTZ
Gregory T. Mutz
Chairman and Director
Principal Executive Officer
Date: March 13, 1997
By: /S/ JOHN E. ALLEN
John E. Allen
President and Director
Date: March 13, 1997
By: /S/ CHARLES C. KRAFT
Charles C. Kraft, Treasurer,
Principal Financial Officer and
Principal Accounting Officer
Date: March 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 350,073
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 352,017
<PP&E> 6,519,115
<DEPRECIATION> 1,908,341
<TOTAL-ASSETS> 4,976,133
<CURRENT-LIABILITIES> 213,758
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 4,762,375
<TOTAL-LIABILITY-AND-EQUITY> 4,976,133
<SALES> 6,575,000
<TOTAL-REVENUES> 1,352,616
<CGS> 6,755,534
<TOTAL-COSTS> 1,082,181
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 180,534
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 270,435
<INCOME-TAX> 0
<INCOME-CONTINUING> 270,435
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 270,435
<EPS-PRIMARY> 10.70
<EPS-DILUTED> 10.70
</TABLE>
