UNITED STATES 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
- - - - - - --- 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
- - - - - - --- EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 33-2294
PARTICIPATING DEVELOPMENT FUND 86
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-1153833
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 29th Floor, New York, NY 10285
- - - - - - -------------------------------------------------- -----------
(Address of principal executive offices) (Zip code)
(212) 526-3237
----------------------------
(Registrant's telephone number, including area code)
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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Balance Sheets
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March 31, December 31,
Assets 1995 1994
- - - - - - ----------------- ---------- ----------
Land $12,419,476 $12,419,476
Buildings and personal property 25,442,985 25,346,253
Tenant improvements 4,830,172 4,830,172
---------- ----------
42,692,633 42,595,901
Less-accumulated depreciation (8,076,764) (7,744,521)
---------- ----------
34,615,869 34,851,380
Restricted cash 153,251 152,162
Cash and cash equivalents 455,924 140,886
---------- ----------
609,175 293,048
Accounts receivable 45,334 18,737
Prepaid expenses, net of accumulated
amortization of $65,203 in 1995 and
$47,360 in 1994 351,779 389,472
Incentives to lease, net of accumulated
amortization of $29,971 in 1995 and
$18,889 in 1994 272,473 283,555
Deferred rent receivable 271,967 269,701
---------- ----------
Total Assets $36,166,597 $36,105,893
========== ==========
Liabilities and Partners' Capital (Deficit)
Liabilities:
Due to affiliates $ 41,726 $ 64,809
Accounts payable and accrued expenses 274,211 323,897
Security deposits payable 153,251 152,162
Prepaid rent 5,919 4,085
---------- ----------
Total Liabilities 475,107 544,953
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Partners' Capital (Deficit)
General Partners (351,618) (355,690)
Limited Partners 36,043,108 35,916,630
---------- ----------
Total Partners' Capital 35,691,490 35,560,940
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Total Liabilities and Partners' Capital $36,166,597 $36,105,893
========== ==========
See accompanying notes to the financial statements.
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Statements of Operations
For the three months ended March 31, 1995 and 1994
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Income 1995 1994
- - - - - - ---------------- --------- ---------
Rental $1,175,320 $ 999,989
Interest 4,830 3,500
Other 1,585 1,755
--------- ---------
Total Income 1,181,735 1,005,244
--------- ---------
Expenses
- - - - - - ----------------
Depreciation and amortization 361,167 426,600
Property operating 290,326 297,134
General and administrative 46,873 49,774
Bad debt expense -- 9,021
--------- ---------
Total Expenses 698,366 782,529
--------- ---------
Net Income $ 483,369 $ 222,715
========= =========
Net Income Allocated:
To the General Partners $ 14,501 $ 6,681
To the Limited Partners 468,868 216,034
--------- ---------
$ 483,369 $ 222,715
========= =========
Per limited partnership unit
(1,124,000 outstanding) $.42 $.19
========= =========
See accompanying notes to the financial statements.
---------------------------------------
Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1995
---------------------------------------
Limited General
Partners Partner Total
---------- -------- ----------
Balance at December 31, 1994 $35,916,630 $(355,690) $35,560,940
Net income 468,868 14,501 483,369
Cash distributions (342,390) (10,429) (352,819)
---------- -------- ----------
Balance at March 31, 1995 $36,043,108 $(351,618) $35,691,490
========== ======== ==========
See accompanying notes to the financial statements.
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Statements of Cash Flows
For the three months ended March 31, 1995 and 1994
------------------------
Cash Flows from Operating Activities: 1995 1994
--------- ---------
Net income $ 483,369 $ 222,715
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 361,167 426,600
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash (1,089) 151,749
Accounts receivable (26,597) 43,958
Prepaid expenses 19,850 (12,557)
Deferred rent receivable (2,266) 72,429
Due to affiliates (23,083) (23,456)
Accounts payable and accrued expenses (49,685) 140,973
Security deposits payable 1,089 7,288
Prepaid rent 1,834 (159,036)
--------- ---------
Net cash provided by operating activities 764,589 870,663
--------- ---------
Cash Flows from Investing Activities:
Additions to real estate (96,732) (691,413)
--------- ---------
Net cash used for investing activities (96,732) (691,413)
--------- ---------
Cash Flows from Financing Activities:
Cash distributions (352,819) (347,629)
--------- ---------
Net cash used for financing activities (352,819) (347,629)
--------- ---------
Net increase (decrease) in cash and cash equivalents 315,038 (168,379)
Cash and cash equivalents at beginning of period 140,886 798,734
--------- ---------
Cash and cash equivalents at end of period $ 455,924 $ 630,355
========= =========
See accompanying notes to the financial statements.
---------------------------------
Notes to the Financial Statements
---------------------------------
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1994 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to fairly present the statement of financial
position as of March 31, 1995 and the results of operations, and cash flows for
the three months ended March 31, 1995 and 1994 and the statement of changes in
partners' capital (deficit) for the three months ended March 31, 1995. Results
of operations for the period are not necessarily indicative of the results to
be expected for the full year.
No significant events have occurred subsequent to fiscal year 1994, and no
material contingencies exist which require disclosure in this interim report
per Regulation S-X, Rule 10-01, Paragraph (a)(5).
----------------------------------------------------
Part I, Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
----------------------------------------------------
Liquidity and Capital Resources
- - - - - - -------------------------------
At March 31, 1995, the Partnership had unrestricted cash and cash equivalents
of $455,924, compared with $140,886 at December 31, 1994. The cash and cash
equivalents balance includes amounts reserved for capital and tenant
improvements, leasing costs, the Working Capital Reserve and cash flow
generated from property operations. The increase of $315,038 reflects cash
flow generated from property operations in excess of payment of cash
distributions totaling $352,819 and additions to real estate of $96,732. The
Partnership's restricted cash balance is comprised of security deposits held by
the Partnership's properties and totaled $153,251 at March 31, 1995, compared
with $152,162 at December 31, 1994.
Buildings and personal property increased by $96,732 to $25,442,985 at March
31, 1995 from $25,346,253 at December 31, 1994. The increase is primarily
attributable to completion of a chiller retrofit project at Powers Ferry Office
Building and construction of balconies at Pebblebrook Apartments.
Accounts receivable totaled $45,334 at March 31, 1995, compared with $18,737 at
December 31, 1994. The increase is largely the result of higher receivable
balances at Foothills Tech Plaza and Pebblebrook Apartments, partially offset
by a lower receivable balance at Powers Ferry Office Building.
Accounts payable and accrued expenses totaled $274,211 at March 31, 1995,
compared with $323,897 at December 31, 1994. The decrease is due to a
reduction in accrued lease incentives relating to a lease buyout at Powers
Ferry Office Building and a reduction in Partnership level accounts payable.
The decrease is partially offset by an increase in accrued real estate taxes at
Powers Ferry Office Building and Pebblebrook Apartments.
On or about May 27, 1995, the Partnership will pay a cash distribution to the
Limited Partners in the amount of $.30 per Unit for the quarter ended March 31,
1995. After reviewing the Partnership's operations for the first quarter ended
March 31, 1995, the General Partner determined that adequate cash reserves
exist to fund anticipated tenant improvements and leasing commission costs
associated with leasing efforts at the Properties, and a cash distribution to
the Limited Partners. The timing and amount of future cash distributions will
be determined quarterly by the General Partner, and will depend on the adequacy
of cash flow and the Partnership's cash reserve requirements.
The General Partner is currently marketing for sale Pebblebrook Apartments and
Foothills Tech Plaza. While the General Partner is encouraged by the initial
response to the sales packages, there can be no assurance that a sale of either
property will occur at the General Partner's targeted price.
Results of Operations
- - - - - - ---------------------
Partnership operations resulted in net income of $483,369 for the quarter ended
March 31, 1995, compared with net income of $222,715 for the corresponding
period in 1994. The increase in net income in 1995 is primarily attributable
to an increase in rental income and a decrease in depreciation and amortization
expenses.
Rental income for the three months ended March 31, 1995 increased to
$1,175,320, compared with $999,989 for the corresponding period a year earlier.
The increase is primarily due to rent escalations at Foothills Tech Plaza and
Powers Ferry Office Building and to higher average occupancy at Powers Ferry
Office Building.
Depreciation and amortization expense totaled $361,167 for the quarter ended
March 31, 1995, compared with $426,600 for the corresponding period a year
earlier. The decrease is largely the result of the write-off of fully
depreciated building and tenant improvements totaling $5.5 million during 1994.
Property operating expenses totaled $290,326 for the quarter ended March, 31,
1995 compared to $297,134 for the corresponding period in 1994. The decrease
is largely due to lower utility expenses at the Powers Ferry Office Building
and Pebblebrook Apartments properties due to favorable weather conditions
during the winter. Bad debt expense for the three months ended March 31, 1994
totaled $9,021. The 1994 expense reflects the write-off of a former tenant's
receivable balance.
At March 31, 1995, the lease levels at each of the properties were as follows:
Foothills Tech Plaza - 100%; Powers Ferry Office Building - 91%; Sunnyvale R&D
- - - - - - - 100%; and Pebblebrook Apartments - 99%.
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PART II OTHER INFORMATION
-------------------------
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended March 31, 1995.
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SIGNATURES
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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.
PARTICIPATING DEVELOPMENT FUND 86
BY: PDF86 REAL ESTATE SERVICES INC.
General Partner
Date: May 12, 1995
BY: /s/Kenneth L. Zakin
Name: Kenneth L. Zakin
Title: Director and President
Date: May 12, 1995
BY: /s/William Caulfield
Name: William Caulfield
Title: Vice President and Chief
Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 455,924
<SECURITIES> 000
<RECEIVABLES> 45,334
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 42,692,633
<DEPRECIATION> (8,076,764)
<TOTAL-ASSETS> 36,166,597
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 000
<TOTAL-LIABILITY-AND-EQUITY> 36,166,597
<SALES> 1,175,320
<TOTAL-REVENUES> 1,181,735
<CGS> 000
<TOTAL-COSTS> 698,366
<OTHER-EXPENSES> 000
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 483,369
<INCOME-TAX> 000
<INCOME-CONTINUING> 483,369
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 483,369
<EPS-PRIMARY> .42
<EPS-DILUTED> 000
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