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, 1998
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 March 31, At December 31,
1998 1997
(unaudited) (audited)
Assets
Real estate, at cost:
Land $ 8,387,590 $ 8,387,590
Buildings and personal property 11,450,426 11,450,426
Tenant improvements 888,412 915,023
20,726,428 20,753,039
Less accumulated depreciation (4,480,164) (4,372,698)
16,246,264 16,380,341
Cash and cash equivalents 689,192 739,170
Restricted cash 44,945 39,381
Accounts receivable 52,367 44,091
Deferred leasing costs, net of
accumulated amortization of $173,706
in 1998 and $159,401 in 1997 165,938 180,242
Incentives to lease, net of
accumulated amortization of $121,371
in 1998 and $113,606 in 1997 115,887 123,652
Prepaid expenses 2,327 5,816
Deferred rent receivable 188,369 195,868
Total Assets $ 17,505,289 $ 17,708,561
Liabilities and
Partners'Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 102,051 $ 93,906
Due to affiliates 6,953 6,953
Security deposits payable 39,381 39,381
Prepaid rent - 71,594
Total Liabilities 148,385 211,834
Partners' Capital (Deficit):
General Partner (572,374) (568,179)
Limited Partners
(1,124,000 units outstanding) 17,929,278 18,064,906
Total Partners' Capital 17,356,904 17,496,727
Total Liabilities and
Partners' Capital (Deficit) $ 17,505,289 $ 17,708,561
Statement of Partners' Capital (Deficit) (unaudited)
For the three months ended March 31, 1998
General Limited
Partner Partners Total
Balance at December 31, 1997 $ (568,179) $18,064,906 $17,496,727
Cash distributions (10,429) (337,200) (347,629)
Net income 6,234 201,572 207,806
Balance at March 31, 1998 $ (572,374) $17,929,278 $17,356,904
Statements of Operations(unaudited)
For the three months ended March 31, 1998 1997
Income
Rental $ 537,193 $ 499,396
Other 1,575 2,505
Interest 6,364 9,218
Total Income 545,132 511,119
Expenses
Property operating 136,532 108,549
Depreciation and amortization 156,146 159,497
General and administrative 44,648 50,851
Total Expenses 337,326 318,897
Net Income $ 207,806 $ 192,222
Net Income Allocated:
To the General Partner $ 6,234 $ 5,767
To the Limited Partners 201,572 186,455
$ 207,806 $ 192,222
Per limited partnership unit
(1,124,000 outstanding) $ .18 $ .17
Statements of Cash Flows(unaudited)
For the three months ended March 31, 1998 1997
Cash Flows From Operating Activities:
Net income $ 207,806 $ 192,222
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 156,146 159,497
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash (5,564) (581)
Accounts receivable (8,276) 15,761
Prepaid expenses 3,489 3,761
Deferred rent receivable 7,499 116
Accounts payable and accrued expenses 8,145 3,495
Due to affiliates - 168
Security deposits payable - (2,073)
Prepaid rent (71,594) 71,594
Net cash provided by operating activities 297,651 443,960
Cash Flows From Financing Activities:
Cash distributions (347,629) (347,629)
Net cash used for financing activities (347,629) (347,629)
Net increase (decrease) in cash and cash equivalents (49,978) 96,331
Cash and cash equivalents, beginning of period 739,170 736,429
Cash and cash equivalents, end of period $ 689,192 $ 832,760
Supplemental Schedule of Non-Cash Investing Activities:
Write-off of fully depreciated tenant improvements $ 26,610 $ 295,667
Notes to the Financial Statements
The unaudited interim financial statements should be read in
conjunction with the Partnership's annual 1997 audited financial
statements within Form 10-K.
The unaudited interim financial statements include all normal and
recurring adjustments which are, in the opinion of management,
necessary to present a fair statement of financial position as of
March 31, 1998 and the results of operations and cash flows for
the three months ended March 31, 1998 and 1997 and the statement
of partners' capital (deficit) for the three months ended March
31, 1998. Results of operations for the periods are not
necessarily indicative of the results to be expected for the full
year.
No significant events have occurred subsequent to year end 1997,
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
At March 31, 1998, the Partnership had cash and cash equivalents
of $689,192, compared with $739,170 at December 31, 1997. The
decrease is primarily due to the timing of receipt of rental
payments at the properties. The Partnership also maintains a
restricted cash balance, which is comprised of tenant security
deposits. Restricted cash totaled $44,945 at March 31, 1998,
compared with $39,381 at December 31, 1997.
Prepaid rent totaled $0 at March 31, 1998, compared to $71,594 at
December 31, 1997. The decrease is primarily due to differences
in the timing of rental payments.
Cobb County, Georgia, has notified the Partnership of its intent,
under its powers of eminent domain, to condemn a portion of the
land at Powers Ferry for the widening of Powers Ferry Road. The
condemnation may occur in 1998, however, the Partnership has not
yet received a formal notice of condemnation from Cobb County.
The condemnation may have a substantial impact on the value of
the property since the road will be moved closer to the building,
the driveway will be relocated and reduced in size and the vast
majority of the landscaping in front of the building will be
removed. Cobb County will be required, as a part of the process,
to compensate the Partnership for the portion of the land
actually taken and any consequential damages (damages occurring
to the portion of the property not taken). The Partnership has
retained legal counsel to ensure that it is sufficiently
compensated for any damages that may result from the
condemnation.
The Partnership will pay a cash distribution to the Limited
Partners of $.30 per Unit for the three months ended March 31, 1998
on or about May 22, 1998. Since inception, the Partnership has
paid total cash distributions of $42.76 per original $50 Unit,
including $23.66 per Unit in return of capital payments which have
reduced the Unit size from $50 to $26.34. The timing and amount of
future cash distributions will be determined quarterly and will
depend on the adequacy of the Partnership's cash flow and cash
reserve requirements.
As of March 31, 1998, lease levels at each of the Properties were
as follows: Sunnyvale R&D - 100%; 1899 Powers Ferry - 86%.
Results of Operations
Partnership operations resulted in net income of $207,806 for the
three months ended March 31, 1998, compared to $192,222 in the
1997 period. The increase is primarily attributable to an
increase in rental income. Rental income totaled $537,193 for
the three months ended March 31, 1998, compared to $499,396 in
the 1997 period, up primarily due to increased average occupancy
at 1899 Powers Ferry. Interest income totaled $6,364 for the
three months ended March 31, 1998, compared to $9,218 for the
three months ended March 31, 1997. The decrease is largely due
to the Partnership's lower average cash balance in the 1998
period.
Property operating expenses totaled $136,532 for the three months
ended March 31, 1998, compared with $108,549 for the three months
ended March 31, 1997. The increase is primarily a result of a
refund of 1996 real estate taxes recognized in 1997 and higher
administrative expenses at 1899 Powers Ferry in the 1998 period.
General and administrative expenses totaled $44,648 for the three
months ended March 31, 1998, compared with $50,851 in the 1997
period. The decrease is primarily attributable to lower audit,
appraisal, printing and postage costs.
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, 1998.
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, 1998 BY: /s/ Jeffrey C. Carter
Director and President
Date: May 14, 1998 BY: /s/Michael T. Marron
Vice President and
Chief Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Mar-31-1998
<CASH> 734,137
<SECURITIES> 000
<RECEIVABLES> 52,367
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 20,726,428
<DEPRECIATION> (4,480,164)
<TOTAL-ASSETS> 17,505,289
<CURRENT-LIABILITIES> 148,385
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 17,356,904
<TOTAL-LIABILITY-AND-EQUITY> 17,505,289
<SALES> 537,193
<TOTAL-REVENUES> 545,132
<CGS> 000
<TOTAL-COSTS> 136,532
<OTHER-EXPENSES> 200,794
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 207,806
<INCOME-TAX> 000
<INCOME-CONTINUING> 207,806
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 207,806
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
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