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 June 30, 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
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 June 30, At December 31,
1997 1996
Assets
Real estate, at cost:
Land $ 8,387,590 $ 8,387,590
Buildings and personal property 11,450,426 11,445,862
Tenant improvements 1,202,785 1,193,476
21,040,801 21,026,928
Less accumulated depreciation (4,404,672) (4,131,094)
16,636,129 16,895,834
Cash and cash equivalents 828,902 736,429
Restricted cash 45,530 44,329
Accounts and other receivables,
net of allowance
for doubtful accounts of
$0 in 1997 and $10,000 in 1996 805 30,188
Prepaid expenses,
net of accumulated amortization
of $205,884 in 1997 and
$175,007 in 1996 210,839 239,359
Incentives to lease,
net of accumulated amortization
of $103,990 in 1997 and $87,892 in 1996 139,497 155,595
Deferred rent receivable 199,989 199,336
Total Assets $18,061,691 $18,301,070
Liabilities and Partners' Capital
Liabilities:
Accounts payable and
accrued expenses $ 108,255 $ 85,080
Due to affiliates 5,183 3,658
Security deposits payable 37,997 40,070
Prepaid rent 71,593 _
Total Liabilities 223,028 128,808
Partners' Capital (Deficit):
General Partner (557,920) (547,912)
Limited Partners
(1,124,000 units outstanding) 18,396,583 18,720,174
Total Partners' Capital 17,838,663 18,172,262
Total Liabilities and
Partners' Capital $18,061,691 $18,301,070
Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $(547,912) $18,720,174 $18,172,262
Cash distributions (20,858) (674,400) (695,258)
Net income 10,850 350,809 361,659
Balance at June 30, 1997 $(557,920) $18,396,583 $17,838,663
Statements of Operations
Three months Six months
ended June 30, ended June 30,
1997 1996 1997 1996
Income
Rental $508,344 $ 741,457 $1,007,740 $1,682,788
Interest 9,392 68,671 18,610 88,638
Other 1,315 3,371 3,820 52,781
Total income 519,051 813,499 1,030,170 1,824,207
Expenses
Property operating 135,358 410,537 243,907 708,941
Depreciation and amortization 161,056 165,775 320,553 333,438
General and administrative 53,200 64,286 104,051 119,107
Total expenses 349,614 640,598 668,511 1,161,486
Income before gain on
sale of real estate 169,437 172,901 361,659 662,721
Gain on sale of real estate _ 2,405,209 _ 2,405,209
Net Income $169,437 $2,578,110 $361,659 $3,067,930
Net Income Allocated:
To the General Partner $ 5,083 $ 29,239 $ 10,850 $ 43,934
To the Limited Partners 164,354 2,548,871 350,809 3,023,996
$169,437 $2,578,110 $361,659 $3,067,930
Per limited partnership unit
(1,124,000 outstanding) $.15 $2.27 $.31 $2.69
Statements of Cash Flows
For the six months ended June 30, 1997 1996
Cash Flows From Operating Activities:
Net income $361,659 $ 3,067,930
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 320,553 333,438
Gain on sale of real estate _ (2,405,209)
Increase (decrease) in cash arising
from changes
in operating assets and liabilities:
Restricted cash (1,201) 57,118
Accounts receivable 29,383 (10,791)
Prepaid expenses (2,357) 7,179
Deferred rent receivable (653) (5,873)
Accounts payable and accrued expenses 23,175 (4,164)
Due to affiliates 1,525 (30,669)
Security deposits payable (2,073) (57,913)
Prepaid rent 71,593 (7,961)
Net cash provided by operating activities 801,604 943,085
Cash Flows From Investing Activities:
Proceeds from sale of real estate assets _ 10,210,955
Additions to real estate (13,873) (25,473)
Net cash provided by (used for)
investing activities (13,873) 10,185,482
Cash Flows From Financing Activities:
Cash distributions (695,258) (1,332,727)
Net cash used for financing activities (695,258) (1,332,727)
Net increase in cash and cash equivalents 92,473 9,795,840
Cash and cash equivalents, beginning of period 736,429 1,480,034
Cash and cash equivalents, end of period $828,902 $11,275,874
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction
with the Partnership's annual 1996 audited financial statements
within Form 10-K.
The unaudited financial statements include all normal and
reoccurring accruals which are, in the opinion of management,
necessary to present a fair statement of financial position as of
June 30, 1997 and the results of operations for the three and six
months ended June 30, 1997 and 1996; and cash flows for the six
months ended June 30, 1997 and 1996 and the statement of changes
in partner's capital (deficit) for the six months ended June 30,
1997. Results of operations for the period 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 $828,902
at June 30, 1997, compared with $736,429 at December 31, 1996.
The increase is due to net cash provided by operating activities
exceeding cash distributions and additions to real estate. The
cash and cash equivalents balance includes funds held as a
working capital reserve to fund tenant improvements and leasing
commissions. The Partnership also had a restricted cash balance
of $45,530 at June 30, 1997, which consists of security deposits.
Accounts receivable decreased to $805 at June 30, 1997 from
$30,188 at December 31, 1996 due to the timing of payments and
the write-off of past due rents. Incentives to lease decreased
to $139,497 at June 30, 1997 from $155,595 at December 31, 1996
largely due the amortization of a lease buyout costs incurred at
1899 Powers Ferry.
Accounts payable and accrued expenses increased to $108,255 at June
30, 1997 from $85,080 at December 31, 1996 mainly due to the
timing of payments for real estate taxes. Prepaid rent increased
to $71,593 at June 30, 1997, compared to $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 August 31, 1997. This
distribution will be funded from Partnership operations and was
determined after a review of the Partnership's 1997 second
quarter operations, anticipated future cash needs and current
cash position.
As of June 30, 1997, lease levels at each of the Properties were
as follows: Sunnyvale R&D - 100%; 1899 Powers Ferry - 83%.
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 and
six months ended June 30, 1997 are not comparable to the
corresponding period in 1996. The Partnership's operations
resulted in net income of $169,437 and $361,659 for the three and
six months ended June 30, 1997, respectively, compared to
$2,578,110 and $3,067,930 for the three and six months ended June
30, 1996.
Rental income totaled $508,344 and $1,007,740 for the three and
six months ended June 30, 1997, respectively, compared with
$741,457 and $1,682,788 for the comparable periods a year
earlier. The decreases are 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.
Interest income declined to $9,392 and $18,610 for the three and
six months ended June 30, 1997, respectively, from $68,671 and
$88,638 for the comparable periods in 1996, largely due to the
Partnership's lower average cash balances in 1997. Other income
totaled $1,315 and $3,820 for the three and six months ended June
30, 1997, respectively, compared with $3,371 and $52,781 for the
comparable periods in 1996. The decreases are primarily due to
the write-off in 1996 of accrued management fees.
Property operating expenses totaled $135,358 and $243,907 for the
three and six months ended June 30, 1997, respectively, compared
to $410,537 and $708,941 for the comparable periods a year
earlier. The decreases are primarily due to the sale of
Pebblebrook Apartments. Depreciation and amortization totaled
$161,056 and $320,553 for the three and six months ended June 30,
1997, respectively, largely unchanged from $165,775 and $333,438
for the comparable periods a year earlier.
General and administrative expenses were $53,200 and $104,051 for
the three and six months ended June 30, 1997, respectively,
compared with $64,286 and $119,107 for the comparable periods in
1996. The decreases are primarily due to lower travel expenses
resulting from the sale of Pebblebrook Apartments, and lower
postage, legal and appraisal expenses.
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 June 30, 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: PDF 86 Real Estate Services Inc.
General Partner
Date: August 13, 1997 BY: /s/Mark J. Marcucci
President and Director
Date: August 13, 1997 BY: /s/Michael Marron
Vice President and Chief Financial
Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<CASH> 828,902
<SECURITIES> 000
<RECEIVABLES> 805
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 21,040,801
<DEPRECIATION> (4,404,672)
<TOTAL-ASSETS> 18,061,691
<CURRENT-LIABILITIES> 108,255
<BONDS> 000
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000
000
<OTHER-SE> 17,838,663
<TOTAL-LIABILITY-AND-EQUITY> 000
<SALES> 1,007,740
<TOTAL-REVENUES> 1,030,170
<CGS> 000
<TOTAL-COSTS> 243,907
<OTHER-EXPENSES> 424,604
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<INCOME-TAX> 000
<INCOME-CONTINUING> 361,659
<DISCONTINUED> 000
<EXTRAORDINARY> 000
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<NET-INCOME> 361,659
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