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, 1997 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.
<PAGE>
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . 4
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 7A. Quantitative and Qualitative
Disclosures About Market Risk . . . . . . . . . 10
Item 8. Financial Statements and
Supplementary Data. . . . . . . . . . . . . . . 11
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure. . . . . . . . . . . . 30
PART III
Item 10. Directors and Executive Officers
of the Partnership. . . . . . . . . . . . . . . 30
Item 11. Executive Compensation. . . . . . . . . . . . . 32
Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . . . . . 33
Item 13. Certain Relationships and
Related Transactions. . . . . . . . . . . . . . 34
PART IV
Item 14. Exhibits, Financial Statement Schedule,
and Reports on Form 8-K . . . . . . . . . . . . 34
Signatures . . . . . . . . . . . . . . . . . . . . . . . . 35
<PAGE>
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:
<PAGE>
<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) (c)
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>
<PAGE>
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.
In August 1997, the Partnership sold the 5521 Meadowbrook Court
Distribution Center, as described in the Partnership's Report on Form 8-K
filed August 21, 1997, 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.
<PAGE>
<TABLE>
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 1996 and 1997:
<CAPTION>
1996 1997
------------------------------------- ------------------------------
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>
Oak View Apartments
Augusta, GA . . . . . . . . . 96% 88% 77% 82% 84% 92% 95% 94%
5521 Meadowbrook Court
Distribution Center
Rolling Meadows, IL . . . . . 100% 50% 50% 50% 100% 100% N/A N/A
1880 Country Farm Road
Naperville, IL. . . . . . . . 100% 100% N/A N/A N/A N/A N/A N/A
<FN>
- --------------------
An "N/A" indicates the property was not owned by the Partnership at the end of the quarter.
</TABLE>
<PAGE>
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 1996 and 1997.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1997, there were 799 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.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA (a)
LINCAM PROPERTIES LTD. SERIES 85
(A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE
YEARS ENDED DECEMBER 31, 1997, 1996, 1995, 1994, AND 1993
(not covered by Independent Auditors' Report)
<CAPTION>
1997 1996 1995 1994 1993
----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total income. . . . . . . . $ 870,554 1,352,610 2,907,891 4,380,033 4,640,228
Provision for loss or
gain on sale of
investment property .. . . $ (79,619) (180,534) 4,768,875 -- 1,300,556
Net income. . . . . . . . . $ 127,562 270,435 3,998,801 1,351,167 2,662,473
Net income per
Interest (b) . . . . . . . $ 5.05 10.70 158.25 53.47 105.37
Total assets. . . . . . . . $3,043,803 4,976,133 17,709,966 28,452,075 28,923,077
Long-term debt. . . . . . . $ -- -- -- 5,000,000 5,000,000
Cash distributions
per Interest (c).. . . . . $ 75.00 510.00 206.00 70.00 64.00
========== ========== ========== ========== ==========
<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) 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. In 1997, the
Partnership generated taxable income of $2.42 per unit and distributed $75.00 per unit.
</TABLE>
<PAGE>
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, 1997, the Partnership had short-term investments in
asset management accounts of $456,573 which will be utilized for
distributions to partners and for working capital requirements.
At December 31, 1997, the Partnership had total current assets of
$515,420, current liabilities of $49,018 and a current ratio of 10.51.
Including a special distribution of the net proceeds from the sale of
Barton Creek Landing Apartments equal to $140 per Limited Partnership
Interest, the Partnership distributed $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. A
distribution of $75 per Limited Partnership Interest from the net sale
proceeds at the 5521 Meadowbrook Court Distribution Center was made during
1997.
On August 6, 1997, the Partnership sold the 5521 Meadowbrook Court
Distribution Center for $2,150,000 in an all cash transaction. As
described in Note 2(c) of Notes to Financial Statements, the Partnership
received $1,870,720 (net of closing costs). The Partnership distributed
these proceeds to the partners via a special distribution on September 5,
1997.
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.
The Corporate General Partner is continuing to explore selling its
remaining property.
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
---------------------
At December 31, 1997, the Partnership owned one investment property,
consisting of an apartment complex located near Augusta, Georgia.
<PAGE>
The decrease in rental income for the twelve months ended December 31,
1997 compared to 1996 of approximately $193,400 (21.5%) is primarily due
to: 1) no rental income generated during 1997 at 1880 Country Farm Drive
Facility ($183,300) due to its being sold in September, 1996; and 2) less
rental income at the Meadowbrook Court Distribution Center ($43,700)
primarily due to its being sold in August, 1997. These decreases were
partially offset by an increase in rental income at Oak View Apartments
($33,600) due to an increase in occupancy.
The decrease in charges to tenants for the twelve months ended
December 31, 1997 compared to 1996 of approximately $6,500 (5.7%) is
primarily due to the 1997 sale of the 5521 Meadowbrook Court Distribution
Center.
Interest income decreased approximately $283,600 for the twelve months
ended December 31, 1997 compared to 1996. This decrease is primarily
attributable to early repayment of the note receivable in July 1996.
Other income increased approximately $1,500 (7%) for the twelve months
ended December 31, 1997 as compared to 1996. This increase is primarily
due to an increase in tenant services and charges at Oak View Apartments.
Property operating expenses decreased approximately $74,700 (14.8%)
for the twelve months ended December 31, 1997 compared to 1996. This
decrease was primarily due to a decrease in property operating expenses at
Meadowbrook Court Distribution Center due to its being sold in August,
1997.
The decrease in depreciation expense of approximately $169,900 (79.4%)
for the twelve months ended December 31, 1997 compared to 1996 is primarily
attributable to: 1) no depreciation recorded in 1997 on the 1880 Country
Farm Drive Facility due to its being sold in 1996 (approximately $39,600);
2) less depreciation charged at the Meadowbrook Court Distribution Center
(approximately $82,900) due to its being held for sale in accordance with
SFAS No. 121; and 3) less depreciation charged at Oak View Apartments
(approximately $47,400) also due to its being held for sale in accordance
with SFAS No. 121 which was adopted as of July 1, 1997.
Management fees paid to an affiliate of the General Partner decreased
approximately $9,400 (19.8%) for the twelve months ended December 31, 1997
as compared to 1996. This decrease is primarily attributable to: 1) the
sale of 1880 Country Farm Drive Facility (approximately $2,000); and 2)
less rental income at Meadowbrook Court Distribution Center (approximately
$9,400). These decreases were partially offset by an increase in rental
income at Oak View Apartments (approximately $2,000).
Professional services have remained essentially unchanged for the
twelve months ended December 31, 1997 as compared to 1996.
General and administration expenses increased approximately $15,500
(20.3%) for the twelve months ended December 31, 1997 as compared to 1996.
This increase is primarily due to: 1) an increase in costs incurred for
mandated electronic filings of reports with the Securities and Exchange
Commission (approximately $5,800) and 2) increases in overhead charges
(approximately $8,100).
For the twelve months ended December 31, 1997 net operating income was
$127,562 or $5.05 per limited partnership interest. Included in net
operating income is a provision for loss of $79,619 made in March, 1997 in
anticipation of the August, 1997 sale of the 5521 Meadowbrook Court
Distribution Center.
<PAGE>
1996 COMPARED TO 1995
---------------------
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.
<PAGE>
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.
INFLATION
Since inflation levels in the United States have been relatively low
over the eleven 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.
YEAR 2000
The General Partner has undertaken a review of its operations that may
be affected by the YEAR 2000 problem. It is the intention of the
Partnership to sell its remaining asset and terminate operations during
1998. Therefore, it is the opinion of the General Partner that there will
be no affect on its operating performance or results of operations from the
YEAR 2000 problem.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
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, 1997 and 1996 . . 13
Consolidated Statements of Operations, years ended
December 31, 1997, 1996 and 1995. . . . . . . . . . . . . 15
Consolidated Statements of Partners' Capital Accounts
(Deficits), years ended December 31, 1997, 1996
and 1995. . . . . . . . . . . . . . . . . . . . . . . . . 17
Consolidated Statements of Cash Flows, years ended
December 31, 1997, 1996 and 1995. . . . . . . . . . . . . 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.
<PAGE>
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, 1997 and 1996, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1997, 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 12, 1998
<PAGE>
<TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
------
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 515,064 350,073
Prepaid expenses and other. . . . . . . . . . . . . . . . . . . . . . . 356 1,944
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . 515,420 352,017
------------ -----------
Investment properties, at cost (notes 2 and 3):
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 816,616
Building and improvements . . . . . . . . . . . . . . . . . . . . . . -- 5,702,499
------------ -----------
-- 6,519,115
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . -- (1,908,341)
------------ -----------
Total investment properties,
net of accumulated depreciation . . . . . . . . . . . . . . -- 4,610,774
Property held for sale, at lower of depreciated cost
or estimated value (notes 1 and 2). . . . . . . . . . . . . . . . . . 2,514,044 --
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,339 13,342
------------ -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . $ 3,043,803 4,976,133
============ ===========
<PAGE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL (DEFICITS)
--------------------------------------------
1997 1996
------------ -----------
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,800 44,411
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 879 1,943
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . -- 146,250
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 14,339 21,154
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . 49,018 213,758
------------ -----------
Partners' capital (deficits) (note 1):
General Partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . 2,000 2,000
Allocated portion of cumulative net income. . . . . . . . . . . . . 107,092 105,817
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (301,961) (283,009)
------------ -----------
(192,869) (175,192)
------------ -----------
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. . . . . . . . . . . . . 10,658,284 10,531,997
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (29,950,275) (28,074,075)
------------ -----------
3,187,654 4,937,567
------------ -----------
Total partners' capital . . . . . . . . . . . . . . . . . . . 2,994,785 4,762,375
------------ -----------
Total liabilities and partners' capital . . . . . . . . . . . $ 3,043,803 4,976,133
============ ===========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . . $ 707,141 900,574 2,222,426
Charges to tenants. . . . . . . . . . . . . . . . . 109,065 115,626 173,299
Interest income . . . . . . . . . . . . . . . . . . 30,763 314,371 473,252
Other income. . . . . . . . . . . . . . . . . . . . 23,585 22,045 38,914
------------ ------------ ------------
Total income. . . . . . . . . . . . . . . . 870,554 1,352,616 2,907,891
------------ ------------ ------------
Expenses:
Property operating expenses . . . . . . . . . . . . 430,181 504,861 732,961
Depreciation. . . . . . . . . . . . . . . . . . . . 44,127 213,998 417,432
Interest expense. . . . . . . . . . . . . . . . . . -- -- 128,493
Management fees paid to affiliate
of general partner (note 7) . . . . . . . . . . . 38,013 47,423 96,386
Professional services . . . . . . . . . . . . . . . 59,229 59,032 72,990
Amortization of deferred expenses . . . . . . . . . -- -- 14,731
General and administrative. . . . . . . . . . . . . 91,823 76,333 75,761
Provision for loss on sale of investment
property. . . . . . . . . . . . . . . . . . . . . 79,619 180,534 --
------------ ------------ ------------
Total expenses. . . . . . . . . . . . . . . 742,992 1,082,181 1,538,754
------------ ------------ ------------
Operating income. . . . . . . . . . . . . . 127,562 270,435 1,369,137
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)
------------ ------------ ------------
Net income before extraordinary item. . . . 127,562 270,435 4,070,725
Extraordinary item:
Loss on early extinguishment of debt. . . . . . . -- -- 71,924
------------ ------------ ------------
Net income. . . . . . . . . . . . . . . . . $ 127,562 270,435 3,998,801
============ ============ ============
<PAGE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1997 1996 1995
------------ ------------ ------------
Net income per limited
partnership interest:
Before extraordinary item. . . . . . . . $ 5.05 10.70 161.10
Extraordinary item. . . . . . . . . . . . . -- -- 2.85
------------ ------------ ------------
Net income. . . . . . . . . . . . . . $ 5.05 10.70 158.25
============ ============ ============
Cash distributions per limited
partnership interest. . . . . . . . . . . $ 75.00 510.00 206.00
============ ============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<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,
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
Net income. . . . -- 1,275 -- 1,275 -- 126,287 -- 126,287
Cash distri-
butions. . . . . -- -- (18,952) (18,952) -- -- (1,876,200) (1,876,200)
------ -------- -------- ---------- ---------- ---------- ----------- ----------
Balance
(deficit) at
December 31,
1997 . . . . . .$2,000 107,092 (301,961) (192,869) 22,479,645 10,658,284 (29,950,275) 3,187,654
====== ======== ======== ========== ========== ========== =========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . $ 127,562 270,435 3,998,801
Adjustments to reconcile net income to
net cash provided by operating activities:
Straight-line of rent adjustment. . . . . . . . . . -- -- 52,041
Loss on early extinguishment of debt. . . . . . . . -- -- 71,924
Provision for loss or (gain) on sale
of investment property. . . . . . . . . . . . . . 79,619 180,534 (4,768,875)
Depreciation. . . . . . . . . . . . . . . . . . . . 44,127 213,998 417,432
Amortization. . . . . . . . . . . . . . . . . . . . -- -- 14,731
Venture partner's share of venture's operations . . -- -- 2,067,287
Other . . . . . . . . . . . . . . . . . . . . . . . -- 373,030 --
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses
and other . . . . . . . . . . . . . . . . . . . . 1,588 (1,794) 37,751
(Increase) decrease in receivable from tenant . . . -- 66,695 (5,016)
(Increase) decrease in other assets . . . . . . . . (997) 35,978 96,375
Increase (decrease) in accounts payable . . . . . . (10,611) 13,505 (46,157)
Increase in accrued expenses. . . . . . . . . . . . (1,064) 1,943 --
Increase (decrease) in accrued interest payable . . -- -- (14,383)
Increase (decrease) in funds held for others. . . . -- (150,879) 24,293
Increase (decrease) in accrued real
estate taxes. . . . . . . . . . . . . . . . . . . (146,250) 28,250 (309,116)
Decrease in security deposits . . . . . . . . . . . (6,815) (10,057) (82,017)
Decrease in unearned income . . . . . . . . . . . . -- -- (1,952)
----------- ----------- -----------
Total adjustments . . . . . . . . . . . . . . . (40,403) 751,203 (2,445,682)
----------- ----------- -----------
Net cash provided by
operating activities. . . . . . . . . . . . . 87,159 1,021,638 1,553,119
----------- ----------- -----------
Cash flows from investing activities:
Additions to buildings and improvements . . . . . . . . (22,147) (16,596) (21,332)
Net cash proceeds from sale of investment
property. . . . . . . . . . . . . . . . . . . . . . . 1,995,131 6,239,950 14,530,759
Collection of note receivable . . . . . . . . . . . . . -- 5,485,000 --
----------- ----------- -----------
Net cash provided by
investing activities. . . . . . . . . . . . . 1,972,984 11,708,354 14,509,427
----------- ----------- -----------
<PAGE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996 1995
----------- ----------- -----------
Cash flows for financing activities:
Cash distributions to Limited Partners. . . . . . . . . (1,876,200) (12,758,160) (5,153,296)
Cash distributions to General Partners. . . . . . . . . (18,952) (128,870) (52,053)
Cash distributions to Venture Partner . . . . . . . . . -- -- (6,173,516)
Repayments of notes payable . . . . . . . . . . . . . . -- -- (5,000,000)
----------- ----------- -----------
Net cash used in financing activities . . . . . (1,895,152) (12,887,030) (16,378,865)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents. . . . . . . . . . . . . . . . . . 164,991 (157,038) (316,319)
Cash and cash equivalents
at beginning of year. . . . . . . . . . . . . . . . . . 350,073 507,111 823,430
----------- ----------- -----------
Cash and cash equivalents
at end of year. . . . . . . . . . . . . . . . . . . . . $ 515,064 350,073 507,111
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . $ -- -- 142,876
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(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:
<PAGE>
<TABLE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<CAPTION>
1997 1996
------------------------------ ------------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . . $ 3,043,803 2,939,928 4,976,133 4,989,277
Partners' capital (deficits):
General partners. . . . . . . . . . $ (192,869) (232,100) (175,192) (213,759)
Limited partners. . . . . . . . . . $ 3,187,654 3,173,225 4,937,567 4,988,898
Net income:
General partners. . . . . . . . . . $ 1,275 611 2,705 64,334
Limited partners. . . . . . . . . . $ 126,287 60,527 267,730 1,734,128
=========== =========== =========== ===========
</TABLE>
<PAGE>
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 5521 Meadowbrook Court Distribution Center was sold in August,
1997. The property was determined to be "held for sale" as of January 1,
1997. In anticipation of the sale, the Partnership made a provision for
loss of $79,619 to reduce the carrying amount of the property 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.
<PAGE>
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.
The property was classified to be "held for sale" as of July 1, 1997.
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 had been leased to Komori America , Inc. since February 11, 1991.
Komori America, Inc.'s lease expired on May 31, 1996 at which time they
vacated the 50% of the distribution center they had occupied.
On January 11, 1994, the Partnership leased 25,000 square feet of the
distribution center to Samsung America, Inc. The thirty-eight month lease
commenced March 6, 1994 and provided 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 occupies the entire
distribution center and is responsible for all operating expenses including
insurance and real estate taxes during the term of the lease.
An affiliate of the General Partners managed the distribution center
for a fee equal to 3% of the gross revenue of the property.
On January 1, 1997, this property was classified to be "held for
sale". On August 6, 1997, the Partnership sold this facility and the land
on which the building is situated for $2,150,000 in an all cash
transaction. The Partnership received $1,995,131 after closing costs,
prorations and commissions. On September 5, 1997, the Partnership made a
special distribution of $75 per limited partnership interest to its
partners.
(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.
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.
<PAGE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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).
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 and made a special distribution of $3,537,616 or
$140 per limited partnership interest.
<PAGE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(4) 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.
(5) LEASES
At December 31, 1997, the Partnership's principal asset is one
apartment complex. The Partnership has determined that all leases relating
to this property are properly classified as operating leases; therefore,
rental income is reported when earned and the cost of this property,
excluding cost of land, is depreciated over the estimated useful life.
Apartment complex leases in effect at December 31, 1997 are generally
for a term of one year or less and provide for total annual rents of
approximately $653,500.
<PAGE>
LINCAM PROPERTIES LTD. SERIES 85
(a limited partnership) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)
Cost and accumulated depreciation of the leased asset is summarized as
follows at December 31, 1997:
Apartment complex:
Cost . . . . . . . . . . . . . $ 3,864,590
Accumulated depreciation . . . (1,350,546)
-----------
Total. . . . . . . . . . . . $ 2,515,044
===========
(6) 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, 1997, 1996 and 1995 are as follows:
1997 1996 1995
------- ------- -------
Property management fees. . . . . $38,013 47,423 96,386
Out-of-pocket expenses. . . . . . $81,235 72,726 70,502
======= ======= =======
<PAGE>
<TABLE>
SCHEDULE III
LINCAM PROPERTIES LTD. SERIES 85
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<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 -- 203,563 254,078 3,610,512 3,864,590
---------- ------- ---------- ------ -------- -------- ---------- ----------
Total . . . . . $ -- 254,078 3,406,949 -- 203,563 254,078 3,610,512 3,864,590
========== ======= ========== ====== ======== ======== ========== ==========
</TABLE>
<PAGE>
<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 . . . . . . . . 1,350,546 1986 9/30/86 5-40 years
----------
Total . . . . . . . . . $1,350,546
==========
<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, 1997 for Federal Tax purposes is $3,864,590.
</TABLE>
<PAGE>
<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:
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Balance at beginning of period. . . . . . . . . . $ 6,519,115 14,415,311 27,241,049
Additions during period . . . . . . . . . . . . . 22,147 16,596 16,291
Less dispositions during period . . . . . . . . . (2,676,672) (7,912,792) (12,842,029)
------------ ------------ ------------
Balance at end of period. . . . . . . . . . . . . $ 3,864,590 6,519,115 14,415,311
============ ============ ============
(C) Reconciliation of accumulated depreciation:
Balance at beginning of period. . . . . . . . . . $ 1,908,341 2,920,741 5,588,495
Additions during period . . . . . . . . . . . . . 44,127 213,998 417,432
Less dispositions during period . . . . . . . . . (601,922) (1,226,398) (3,085,186)
------------ ------------ ------------
Balance at end of period. . . . . . . . . . . . . $ 1,350,546 1,908,341 2,920,741
============ ============ ============
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of auditors during fiscal years of 1997, 1996 or
1995.
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
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 1998.
The business experience of each director and officer of the Corporate
General Partner of the Partnership is as follows:
Gregory T. Mutz (age 52) is the Chairman and a Director of LincAm
Properties, Inc. Mr. Mutz is also the Chairman of the Board of Directors
of AMLI Residential Properties Trust and Chairman of the Board of AMLI
Commercial Properties, L.L.C. the successor companies to AMLI Realty Co.,
which he co-founded in 1980. Mr. Mutz is also Chairman of the Board of
Excell Global Services, L.L.C., a call service and data management company.
Mr. Mutz has over twenty years of real estate experience. Prior to
founding AMLI, he was an officer of White, Weld & Co., Incorporated (1976-
78) and was associated with the Chicago law firm of Mayer, Brown & Platt
(1973-76). He received a B.A. from DePauw University in 1967 and a J.D.
from the University of Michigan Law School in 1973. Mr. Mutz is a director
of Baldwin & Lyons (a casualty insurance company) a Director of the Chicago
Trust Company family of Mutual Funds, a Director of AVTEL Communications
(telecom company), a Director of the Illinois Chapter of The Nature
Conservancy, and a Director of the National Multi-Housing Council.
<PAGE>
John E. Allen (age 61) is the President and a Director of LincAm
Properties, Inc. Mr. Allen is also Vice Chairman of the Board of AMLI
Residential Properties Trust, Vice Chairman of the Board of AMLI Commercial
Properties, L.L.C. and President and a Director of AMLI Realty Co., which
he co-founded in 1980. Mr. Allen is also a member of the Boards of
Directors of UICI, AVTEL Communications, Inc. and Excell Global Services,
L.L.C. Mr. Allen has over twenty years of real estate experience. Prior
to co-founding AMLI, he was a partner at the Chicago law firm of Mayer,
Brown & Platt, with which he had been associated since 1964. While with
Mayer, Brown & Platt, Mr. Allen was involved extensively with equity
financing and joint ventures for numerous real estate projects in the U.S.
and abroad. Mr. Allen received a B.S. in Business from Indiana University
in 1961 and a J.D. from the Indiana University School of Law in 1964. He
is a member of the National Association of Real Estate Investment Trusts
("NAREIT").
Lawrence T. Kissko (age 50) is a Vice President, an Assistant
Secretary and Director of LincAm Properties, Inc. He is also Vice
President and Director of Real Estate Investment of Lincoln Investment
Management, Inc. In this position Mr. Kissko is responsible for the
management of the real estate and mortgage loan production. 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 54) is a Vice President, an Assistant
Secretary and Director of LincAm Properties, Inc. and is Vice President and
Director of Real Estate Asset Management at Lincoln National Corporation.
Ms. Montgomery is responsible for Lincoln's real estate equity 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 50) is Treasurer of LincAm Properties, Inc. He
is also a Senior Vice President and Treasurer of AMLI Residential
Properties Trust and has been associated with AMLI since 1983. Mr. Kraft
is responsible for AMLI's financial reporting, tax planning, treasury,
employee benefits and cash management operations. Prior to joining AMLI,
he was associated with the Chicago office of KPMG Peat Marwick (1968-1982)
in the firm's national real estate practice. Mr. Kraft received an A.B.
from Wabash College in 1968. He is a past Director of the Chicago Board of
Realtors and is a CPA. Mr. Kraft is a member of The American Institute of
Certified Public Accountants and the Illinois CPA Society.
Charlotte A. Sparrow (age 39) 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 34) 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.
<PAGE>
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 1997, the General Partners received distributions
of $18,952.
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 1997, Amli Management Co., an affiliate of the General
Partners, earned property management fees aggregating $38,013 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 1997, affiliates of
the General Partners of the Partnership were reimbursed for such out-of-
pocket expenses in the amount of $61,494, all of which was repaid as of
December 31, 1997.
<PAGE>
<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>
<PAGE>
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 1997 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
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 6, 1998
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 6, 1998
By: /S/ JOHN E. ALLEN
John E. Allen
President and Director
Date: March 6, 1998
By: /S/ CHARLES C. KRAFT
Charles C. Kraft, Treasurer,
Principal Financial Officer and
Principal Accounting Officer
Date: March 6, 1998
<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, 1997 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-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 515,064
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 515,420
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,043,803
<CURRENT-LIABILITIES> 49,018
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,994,785
<TOTAL-LIABILITY-AND-EQUITY> 3,043,803
<SALES> 0
<TOTAL-REVENUES> 870,554
<CGS> 0
<TOTAL-COSTS> 742,992
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 79,619
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 127,562
<INCOME-TAX> 0
<INCOME-CONTINUING> 127,562
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,562
<EPS-PRIMARY> 5.05
<EPS-DILUTED> 5.05
</TABLE>
