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, 1997
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
- --------------------------- --------------
State or Other Jurisdiction I.R.S. Employer Identification No.
of Incorporation or Organization
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,
1997 1996
Assets
Real estate, at cost:
Land $ 8,387,590 $ 8,387,590
Buildings and personal property 11,445,862 11,445,862
Tenant improvements 1,193,476 1,193,476
---------- ----------
21,026,928 21,026,928
Less accumulated depreciation (4,266,235) (4,131,094)
---------- ----------
16,760,693 16,895,834
Cash and cash equivalents 832,760 736,429
Restricted cash 44,910 44,329
Accounts and other receivables, net of allowance
for doubtful accounts of $0 in 1997
and $10,000 in 1996 14,427 30,188
Prepaid expenses, net of accumulated amortization
of $191,201 in 1997 and $175,007 in 1996 219,404 239,359
Incentives to lease, net of accumulated amortization
of $96,054 in 1997 and $87,892 in 1996 147,433 155,595
Deferred rent receivable 199,220 199,336
---------- ----------
Total Assets $18,218,847 $18,301,070
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 88,575 $ 85,080
Due to affiliates 3,826 3,658
Security deposits payable 37,997 40,070
Prepaid rent 71,594 --
---------- ----------
Total Liabilities 201,992 128,808
---------- ----------
Partners' Capital (Deficit):
General Partner (552,574) (547,912)
Limited Partners (1,124,000 units outstanding) 18,569,429 18,720,174
---------- ----------
Total Partners' Capital 18,016,855 18,172,262
---------- ----------
Total Liabilities and Partners' Capital $18,218,847 $18,301,070
========== ==========
Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $(547,912) $18,720,174 $18,172,262
Cash distributions (10,429) (337,200) (347,629)
Net income 5,767 186,455 192,222
-------- ---------- ----------
Balance at March 31, 1997 $(552,574) $18,569,429 $18,016,855
======== ========== ==========
Statements of Operations
For the three months ended March 31, 1997 1996
Income
Rental $499,396 $ 941,331
Other 2,505 49,410
Interest 9,218 19,967
------- ---------
Total Income 511,119 1,010,708
Expenses
Property operating 108,549 298,404
Depreciation and amortization 159,497 167,663
General and administrative 50,851 54,821
------- ---------
Total Expenses 318,897 520,888
------- ---------
Net Income $192,222 $ 489,820
======= =========
Net Income Allocated:
To the General Partner $ 5,767 $ 14,695
To the Limited Partners 186,455 475,125
------- ---------
$192,222 $ 489,820
======= =========
Per limited partnership unit
(1,124,000 outstanding) $ .17 $ .42
==== ====
Statements of Cash Flows
For the three months ended March 31, 1997 1996
Cash Flows From Operating Activities:
Net income $192,222 $489,820
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 159,497 167,663
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash (581) 2,138
Accounts and other receivables 15,761 (15,360)
Prepaid expenses 3,761 12,583
Deferred rent receivable 116 (1,240)
Accounts payable and accrued expenses 3,495 40,795
Due to affiliates 168 (32,741)
Security deposits payable (2,073) (2,138)
Prepaid rent 71,594 (76,755)
------- -------
Net cash provided by operating activities 443,960 584,765
Cash Flows From Investing Activities:
Additions to real estate -- (19,459)
------- -------
Net cash used for investing activities -- (19,459)
Cash Flows From Financing Activities:
Cash distributions (347,629) (984,738)
------- -------
Net cash used for financing activities (347,629) (984,738)
------- -------
Net increase (decrease) in cash and cash equivalents 96,331 (419,432)
Cash and cash equivalents, beginning of period 736,429 1,480,034
------- ---------
Cash and cash equivalents, end of period $ 832,760 $1,060,602
======= =========
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1996 audited financial statements within Form 10-K.
The unaudited interim financial statements include all normal and reoccurring
adjustments which are, in the opinion of management, necessary to present a
fair statement of financial position as of March 31, 1997 and the results of
operations and cash flows for the three months ended March 31, 1997 and 1996
and the statement of partners' capital (deficit) for the three months ended
March 31, 1997. Results of operations for the periods are not necessarily
indicative of the results to be expected for the full year.
Certain prior year amounts have been reclassified in order to conform to the
current year's presentation.
No significant events have occurred subsequent to fiscal year 1996, and no
material contingencies exist which would 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 $832,760 at March 31,
1997, compared with $736,429 at December 31, 1996. The increase is due to net
cash provided by operating activities exceeding cash distributions. 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 $44,910 at March 31, 1997, which consists of security deposits.
Accounts receivable decreased to $14,427 at March 31, 1997 from $30,188 at
December 31, 1996 due to the write-off of past due rents.
Prepaid rent increased to $71,594 at March 31, 1997 from $0 at December 31,
1996 due to the timing of rental receipts.
A cash distribution in the amount of $.30 per Unit will be paid to the Limited
Partners on or about May 31, 1997. This distribution will be funded from
Partnership operations and was declared after a review of the Partnership's
1997 first quarter operations, anticipated future cash needs and current cash
position.
Results of Operations
As a result of the sale of Pebblebrook Apartments on May 23, 1996, the
Partnership's results of operations for the three months ended March 31, 1997
are not comparable to the corresponding period in 1996. The Partnership's
operations resulted in net income of $192,222 for the three months ended March
31, 1997, compared to $489,820 for the three months ended March 31, 1996.
Rental income totaled $499,396 for the three months ended March 31, 1997,
compared with $941,331 a year earlier. The decrease is primarily attributable
to the sale of Pebblebrook Apartments and, to a lesser extent, lower rental
income at 1899 Powers Ferry reflecting a decline in occupancy. Other income
totaled $2,505 for the three months ended March 31, 1997, compared with $49,410
for the comparable period in 1996. The decrease is primarily due to the
write-off in 1996 of accrued management fees. Interest income decreased to
$9,218 for the three months ended March 31, 1997, from $19,967 a year earlier,
primarily reflecting the Partnership's lower average cash balances in 1997.
Property operating expenses totaled $108,549 for the three months ended March
31, 1997, compared to $298,404 a year earlier. The decrease is primarily due
to the sale of Pebblebrook Apartments and lower real estate taxes at 1899
Powers Ferry. Depreciation and amortization totaled $159,497 for the three
months ended March 31, 1997, largely unchanged from $167,663 a year earlier.
As of March 31, 1997, lease levels at each of the Properties were as follows:
Sunnyvale R&D - 100%; 1899 Powers Ferry - 84%.
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 - No reports on Form 8-K
were filed during the quarter ended March 31, 1997.
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 15, 1997 BY: /s/ Kenneth L. Zakin
Director and President
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 832,760
<SECURITIES> 000
<RECEIVABLES> 14,427
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 21,026,928
<DEPRECIATION> (4,266,235)
<TOTAL-ASSETS> 18,218,847
<CURRENT-LIABILITIES> 201,992
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 18,016,855
<TOTAL-LIABILITY-AND-EQUITY> 18,218,847
<SALES> 499,396
<TOTAL-REVENUES> 511,119
<CGS> 000
<TOTAL-COSTS> 108,549
<OTHER-EXPENSES> 210,348
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 192,222
<INCOME-TAX> 000
<INCOME-CONTINUING> 192,222
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 192,222
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
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