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, 1996
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
Delaware
---------- 06-1153833
State or Other Jurisdiction of ------------
Incorporation or Organization I.R.S. Employer
Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson
- ------------------------------------- 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 ____
Balance Sheets
- -------------- At March 31, At December 31,
1996 1995
Assets
Land $ 8,387,590 $ 8,387,590
Buildings and personal property 11,460,068 11,460,068
Tenant improvements 1,234,416 1,234,416
21,082,074 21,082,074
Less accumulated depreciation (3,825,403) (3,683,523)
17,256,671 17,398,551
Real estate assets held for sale 7,799,732 7,780,273
Cash and cash equivalents 1,060,602 1,480,034
Restricted cash 98,148 100,286
1,158,750 1,580,320
Accounts receivable 46,664 31,304
Prepaid expenses, net of accumulated
amortization of $129,505 in 1996 and
$111,997 in 1995 243,590 273,681
Incentives to lease, net of accumulated
amortization of $63,069 in 1996 and
$54,794 in 1995 180,418 188,693
Deferred rent receivable 194,874 193,634
Total Assets $ 26,880,699 $ 27,446,456
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 171,251 $ 133,022
Due to affiliates 18,569 48,744
Security deposits payable 98,148 100,286
Prepaid rent 2,800 79,555
Total Liabilities 290,768 361,607
Partners' Capital (Deficit):
General Partner (451,651) (436,797)
Limited Partners (1,124,000 units
outstanding) 27,041,582 27,521,646
Total Partners' Capital 26,589,931 27,084,849
Total Liabilities and Partners'
Capital $ 26,880,699 $ 27,446,456
Statement of Partners' Capital (Deficit)
- ----------------------------------------
For the three months ended March 31, 1996
General Limited
Partner Partners Total
Balance at December 31, 1995 $(436,797) $27,521,646 $27,084,849
Cash distributions (29,549) (955,189) (984,738)
Net income 14,695 475,125 489,820
Balance at March 31, 1996 $(451,651) $27,041,582 $26,589,931
Statements of Operations
- -------------------------
For the three months ended March 31, 1996 1995
Income
Rental $ 941,331 $ 1,175,320
Other 49,410 1,585
Interest 19,967 4,830
Total Income 1,010,708 1,181,735
Expenses
Property operating 298,404 290,326
Depreciation and amortization 167,663 361,167
General and administrative 54,821 46,873
Total Expenses 520,888 698,366
Net Income $ 489,820 $ 483,369
Net Income Allocated:
To the General Partner $ 14,695 $ 14,501
To the Limited Partners 475,125 468,868
$ 489,820 $ 483,369
Per limited partnership unit
(1,124,000 outstanding) $ .42 $ .42
Statements of Cash Flows
- -------------------------
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities
Net income $ 489,820 $ 483,369
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 167,663 361,167
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash 2,138 (1,089)
Accounts receivable (15,360) (26,597)
Prepaid expenses 12,583 19,850
Deferred rent receivable (1,240) (2,266)
Accounts payable and accrued expenses 38,229 (49,685)
Due to affiliates (30,175) (23,083)
Security deposits payable (2,138) 1,089
Prepaid rent (76,755) 1,834
Net cash provided by operating activities 584,765 764,589
Cash Flows From Investing Activities
Additions to real estate (19,459) (96,732)
Net cash used for investing activities (19,459) (96,732)
Cash Flows From Financing Activities
Cash distributions (984,738) (352,819)
Net cash used for financing activities (984,738) (352,819)
Net increase (decrease) in cash and cash
equivalents (419,432) 315,038
Cash and cash equivalents, beginning of period 1,480,034 140,886
Cash and cash equivalents, end of period $1,060,602 $ 455,924
Notes to the Financial Statements
- ----------------------------------
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1995 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of March 31, 1996 and the results of operations and cash flows for
the three months ended March 31, 1996 and 1995 and the statement of changes in
partners' capital (deficit) for the three months ended March 31, 1996. 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 1995, 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
- -------------------------------
The Partnership had cash and cash equivalents totaling $1,060,602 at March 31,
1996, compared with $1,480,034 at December 31, 1995. The decrease is primarily
due to real estate additions and cash distributions to partners exceeding cash
provided by operations. The cash and cash equivalents balance includes funds
held as a working capital reserve to fund tenant improvements and leasing
commissions, in addition to cash generated from operations. The Partnership
also had a restricted cash balance of $98,148 at March 31, 1996, which consists
of security deposits.
In January 1996 the General Partner executed a purchase and sale agreement with
an unaffiliated third party to sell Pebblebrook Apartments for a price of
$10,570,000, net of commissions. The sale was originally expected to close in
late January 1996 and was subsequently postponed until March 1996. However,
during the due diligence period, the prospective buyer raised concerns
regarding the physical condition of certain areas of the Property. While
negotiations are continuing and the General Partner remains confident that the
sale will be successfully concluded, there is no assurance that an agreement
can be reached with the buyer regarding its concerns. Therefore, it remains
possible that the sale will be further delayed or possibly not close at all.
Operations at the property remained strong during the 1996 first quarter,
reflecting the healthy market conditions in the Kansas City area and the
continued appeal of the property.
At Powers Ferry Office Building, the General Partner extended, for two years, a
lease with a tenant occupying 1,200 square feet, through April 1998.
Accounts receivable increased to $46,664 at March 31, 1996 from $31,304 at
December 31, 1995 due to the timing of rent payments. Prepaid expenses totaled
$243,590 at March 31, 1996, compared with $273,681 at December 31, 1995. The
lower 1996 balance reflects the amortization of prepaid insurance and leasing
commissions.
Accounts payable and accrued expenses totaled $171,251 at March 31, 1996
compared with $133,022 at December 31, 1995. The increase is primarily due to
real estate tax accruals associated with two of the Partnership's properties.
A cash distribution in the amount of $.30 per Unit will be paid to the Limited
Partners on or about May 20, 1996. This distribution will be funded from
Partnership operations and was declared after a review of the Partnership's
1996 first quarter operations, anticipated future cash needs and current cash
position.
Results of Operations
- ----------------------
As a result of the sale of Foothills Tech Plaza on September 29, 1995, the
Partnership's results of operations for the three months ended March 31, 1996
are not comparable to the corresponding period in 1995. The Partnership's
operations resulted in net income of $489,820 for the three months ended March
31, 1996, relatively unchanged from net income of $483,369 for the three months
ended March 31, 1995.
Rental income totaled $941,331 for the three months ended March 31, 1996,
compared with $1,175,320 a year earlier. The decrease is primarily
attributable to the sale of Foothills Tech Plaza. Other income totaled $49,410
for the three months ended March 31, 1996, compared with $1,585 for the
comparable period in 1995. The increase is primarily due to the write-off of
accrued management fees.
Property operating expenses totaled $298,404 for the three months ended March
31, 1996, relatively unchanged from $290,326 a year earlier. Depreciation and
amortization decreased to $167,663 at March 31, 1996 from $361,167 a year
earlier, primarily due to the sale of Foothills Tech Plaza.
As of March 31, 1996, lease levels at each of the Properties were as follows:
Sunnyvale R&D-100%; Powers Ferry Office Building-94%; Pebblebrook
Apartments-92%.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K.
On February 16, 1996, based upon, among other things, the
advice of Partnership counsel, Skadden, Arps, Slate, Meagher &
Flom, the General Partner adopted a resolution that states,
among other things, if a Change of Control (as defined below)
occurs, the General Partner may distribute the Partnership's
cash balances not required for its ordinary course day-to-day
operations. "Change of Control" means any purchase or offer to
purchase more than 10% of the Units that is not approved in
advance by the General Partner. In determining the amount of
the distribution, the General Partner may take into account all
material factors. In addition, the Partnership will not be
obligated to make any distribution to any partner and no partner
will be entitled to receive any distribution until the General
Partner has declared the distribution and established a record
date and distribution date for the distribution. The Partnership
filed a Form 8-K disclosing this resolution on February 23,
1996.
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.
PARTICIPATING DEVELOPMENT FUND 86
BY: PDF86 Real Estate Services Inc.
General Partner
Date: May 14, 1996 BY: /s/ Kenneth L Zakin
President
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<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Mar-31-1996
<CASH> 1,116,138
<SECURITIES> 0
<RECEIVABLES> 46,664
<ALLOWANCES> 0
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<PP&E> 21,082,074
<DEPRECIATION> 3,825,403
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<OTHER-SE> 26,589,931
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<TOTAL-REVENUES> 1,010,708
<CGS> 0
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<OTHER-EXPENSES> 222,484
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 489,820
<INCOME-TAX> 0
<INCOME-CONTINUING> 489,820
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