SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-15649
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BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Illinois 36-3327914
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
March 31, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
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Cash and cash equivalents $ 729,807 $ 1,058,935
Escrow deposits 1,230,279 379,730
Accounts and accrued interest receivable 209,286 67,036
Deferred expenses, net of accumulated
amortization of $709,023 in 1995 and
$671,472 in 1994 344,696 382,247
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2,514,068 1,887,948
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Investment in real estate:
Land 11,137,023 11,137,023
Buildings and improvements 83,187,367 83,187,367
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94,324,390 94,324,390
Less accumulated depreciation 32,193,066 31,495,152
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Investment in real estate, net of
accumulated depreciation 62,131,324 62,829,238
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$ 64,645,392 $ 64,717,186
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LIABILITIES AND PARTNERS' DEFICIT
Accounts payable $ 170,432 $ 169,360
Due to affiliates 107,044 74,467
Accrued liabilities, principally real
estate taxes 340,097 169,874
Security deposits 436,787 440,214
Mortgage notes payable 72,761,685 73,208,295
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Total liabilities 73,816,045 74,062,210
Affiliates' participation in joint ventures (938,111) (1,271,542)
Partners' deficit (59,791 Limited
Partnership Interests issued and
outstanding) (8,232,542) (8,073,482)
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$ 64,645,392 $ 64,717,186
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Rental and service $ 4,056,812 $ 3,922,448
Interest on short-term investments 23,856 9,827
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Total income 4,080,668 3,932,275
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Expenses:
Interest on mortgage notes payable 1,668,721 1,564,276
Depreciation 697,914 697,914
Amortization of deferred expenses 37,551 37,551
Property operating 1,206,302 1,164,057
Real estate taxes 341,320 349,320
Property management fees 201,588 196,154
Administrative 95,661 116,245
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Total expenses 4,249,057 4,125,517
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Loss before participation in joint ventures (168,389) (193,242)
Affiliates' participation in losses (income)
from joint ventures 9,329 (21,896)
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Net loss $ (159,060) $ (215,138)
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Net loss allocated to General Partner $ (1,591) $ (2,151)
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Net loss allocated to Limited Partners $ (157,469) $ (212,987)
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Net loss per Limited Partnership Interest
(59,791 issued and outstanding) $ (2.63) $ (3.56)
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the quarters ended March 31, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net loss $ (159,060) $ (215,138)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Affiliates' participation in (losses)
income from joint ventures (9,329) 21,896
Depreciation of properties 697,914 697,914
Amortization of deferred expenses 37,551 37,551
Net change in:
Escrow deposits 1,031 130,894
Accounts and accrued interest
receivable (142,250) (143,534)
Accounts payable 1,072
Due to affiliates 32,577 56,540
Accrued liabilities 170,223 160,718
Security deposits (3,427) 3,270
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Net cash provided by operating activities 626,302 750,111
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Financing activities:
Capital contribution by joint venture
partner - affiliate 342,760
Distribution to joint venture partner -
affiliate (82,806)
Principal payments on mortgage
notes payable (446,610) (357,665)
Deposit for mortgage loan refinancing (851,580)
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Net cash used in financing activities (955,430) (440,471)
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Net change in cash and cash equivalents (329,128) 309,640
Cash and cash equivalents at beginning
of period 1,058,935 556,725
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Cash and cash equivalents at end of period $ 729,807 $ 866,365
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1995, and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the quarter ended March 31, 1995 and 1994, the Partnership incurred and
paid interest expense on mortgage notes payable of $1,668,721 and $1,564,276,
respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1995 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost None $107,044
<PAGE>
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Realty Investors 86-Series I A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1984 to invest in and operate
income-producing real property. The Partnership raised $59,791,000 through the
sale of Limited Partnership Interests and utilized these proceeds to acquire
eight real property investments and a minority joint venture interest in one
additional real property. Prior to 1995, title to two of these properties and
the property in which the Partnership held a minority joint venture interest
were relinquished through foreclosure. The Partnership continues to operate its
six remaining properties.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1994 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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Due primarily to improved property operations, which were partially offset by
increased mortgage loan interest expense, the net loss decreased for the
quarter ended March 31, 1995 as compared to the same period in 1994. Further
discussion of the Partnership's operations is summarized below.
1995 Compared to 1994
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Higher rental rates at the Lakeville Resort and Brighton Townhomes apartment
complexes resulted in an increase in rental and service income for the quarter
ended March 31, 1995 as compared to the same period in 1994.
Higher interest rates resulted in an increase in interest income on short-term
investments during the quarter ended March 31, 1995 as compared to the same
period in 1994.
The Lakeville Resort Apartments mortgage note carries an interest rate based on
a market index. Increases in this market index have caused an increase in
interest expense on mortgage notes payable during the quarter ended March 31,
1995 as compared to the same period in 1994.
Higher expenditures in 1995 at the Lakeville Resort, Lakeside and Cedar Crest
apartment complexes related to landscaping and floor and wall covering upgrades
were partially offset by exterior painting expenses incurred at the Lake Ridge
Apartments in 1994, resulting in an increase in property operating expense
during the quarter ended March 31, 1995 as compared to the same period in 1994.
Lower legal fees and printing costs resulted in a decrease in administrative
expenses during the quarter ended March 31, 1995 as compared to the same period
in 1994.
<PAGE>
As discussed above, higher interest expense was incurred on the mortgage note
for the Lakeville Resort Apartments; this additional expense was partially
offset by higher rental and service income at the property during 1995. This
resulted in affiliates' participation in losses from joint ventures during the
quarter ended March 31, 1995 as compared to income during the same period in
1994.
Liquidity and Capital Resources
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The cash position of the Partnership decreased at March 31, 1995 as compared to
December 31, 1994. The Partnership's operating activities consisted primarily
of Cash Flow generated from the operation of the Partnership's properties which
was partially offset by the payment of administrative expenses. The Partnership
used its cash reserves and a capital contribution from its joint venture
partner-affiliate to make a deposit required in connection with a refinancing
application for the Lakeville Resort Apartments mortgage loan. Other financing
activity included the payment of principal on the properties' mortgage loans.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit is
considered significant if it exceeds $250,000 annually or 20% of the property's
rental and service income. The Partnership defines cash flow generated from its
properties as an amount equal to the property's revenue receipts less property
related expenditures, which include debt service payments. During the quarters
ended March 31, 1995 and 1994, the Brighton Townhomes, Cedar Crest, Lakeville
and Pines of Cloverlane apartment complexes generated positive cash flow. The
Lake Ridge Apartments generated positive cash flow during 1995 as compared to a
marginal deficit during 1994 due to exterior painting expenses incurred in
1994. The Lakeside Apartments generated a marginal deficit during 1995 as
compared to positive cash flow during 1994 due to higher expenditures related
to floor and wall covering upgrades.
While the cash flow of certain of the Partnership's properties has improved,
the General Partner continues to pursue a number of actions aimed at improving
the cash flow of the Partnership's properties including refinancing of mortgage
loans, improving property operating performance, and seeking rent increases
where market conditions allow. As of March 31, 1995, the occupancy rates of the
Partnership's properties ranged from 92% to 100%. Despite improvements in the
local economies and rental markets where certain of the Partnership's
properties are located, the General Partner believes that continued ownership
of many of the properties is in the best interests of the Partnership in order
to maximize returns to Limited Partners and, therefore, the Partnership will
continue to own these properties for longer than the holding period for the
assets originally described in the prospectus.
Each of the Partnership's properties is owned through the use of third-party
mortgage loan financing and, therefore, the Partnership is subject to the
financial obligations required by such loans. As a result of the General
Partner's efforts to obtain loan modifications as well as refinancings of many
existing loans with new lenders, the Partnership has no third-party financing
which matures prior to 1996. The General Partner is currently evaluating
options for refinancing the $18,900,000 Lakeville Resort Apartments mortgage
note which carries an interest rate based on a market index, and the
Partnership has remitted approximately $852,000 as a refundable good faith
deposit to a potential lender. The joint venture partner-affiliate contributed
approximately $343,000 to the Partnership, as its share of this good faith
deposit.
<PAGE>
Although investors have received certain tax benefits, the Partnership has not
commenced distributions. Future distributions will depend on the level of cash
flow from the Partnership's remaining properties, the retention of adequate
cash reserves for financing and operating needs, and proceeds from future
property sales and mortgage loan refinancings, as to all of which there can be
no assurances.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1
of the Registrant's Registration Statement on Form S-11 dated December 16, 1985
(Registration No. 33-361), and Form of Confirmation regarding Interests in the
Partnership set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q
for the quarter ended June 30, 1992 (Commission File No. 0-15649) are
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the three month period
ending March 31, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended March 31, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR REALTY INVESTORS 86-SERIES I
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/ Thomas E. Meador
--------------------------------
Thomas E. Meador
President and Chief Executive Officer (Principal
Executive Officer) of Balcor Partners-XIX, the
General Partner
By: /s/ Brian Parker
---------------------------------
Brian Parker
Senior Vice President, and Chief
Financial Officer (Principal Accounting and
Financial Officer) of Balcor Partners-XIX, the
General Partner
Date: May 12, 1995
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<PAGE>
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