UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-15646
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BALCOR GROWTH FUND
A REAL ESTATE INVESTMENT FOR CAPITAL APPRECIATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3378299
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
PART I
Item 1. Business
----------------
Balcor Growth Fund A Real Estate Investment for Capital Appreciation (the
"Registrant") is a limited partnership formed in August 1985 under the laws of
the State of Illinois. The Registrant raised $7,084,000 from sales of Limited
Partnership Interests. The Registrant's operations consist exclusively of
investment in and operation of income-producing real property, and all
financial information included in this report relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire joint venture
interests in the two real property investments described under Item 2.
Properties. See Note 3 of Notes to Financial Statements for additional
information regarding these joint ventures. The Partnership Agreement generally
provides that the proceeds of any sale or refinancing of the Registrant's
properties will not be reinvested in new acquisitions.
During 1994, institutionally owned and managed multi-family residential
properties in many markets continued to experience favorable operating
conditions combined with relatively low levels of new construction. These
favorable operating conditions were supported by the strong pattern of national
economic growth which contributed to job growth and rising income levels in
most local economies. However, some rental markets continue to remain extremely
competitive; therefore, the General Partner's goals are to maintain high
occupancy levels, while increasing rents where possible, and to monitor and
control operating expenses and capital improvement requirements at the
properties. Of the two properties in which the Registrant holds joint venture
interests, during 1994 one generated positive cash flow while one generated a
marginal cash flow deficit. The Registrant's properties are subject to certain
competitive conditions in the markets in which they are located. See Item 7.
Liquidity and Capital Resources for additional information.
Historically, real estate investments have experienced the same cyclical
characteristics affecting most other types of long-term investments. While real
estate values have generally risen over time, the cyclical character of real
estate investments, together with local, regional and national market
conditions, has resulted in periodic devaluations of real estate in particular
markets, as has been experienced in the last few years. As a result of these
factors, it may become necessary for the Registrant to retain ownership of its
joint venture interests in the properties for longer than the holding period
for the assets originally described in the prospectus. The General Partner
examines the operations of each property and each local market in conjunction
with the Registrant's long-term dissolution strategy when determining the
optimal time to sell each of the properties in which the Registrant holds joint
venture interests.
The Registrant, by virtue of its ownership of real estate, is subject to
federal and state laws and regulations covering various environmental issues.
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental issues and to conduct tests for
environmental contamination as appropriate. The General Partner is not aware of
any potential liability due to environmental issues or conditions that would be
material to the Registrant.
The officers and employees of Balcor Partners-XX, the General Partner of the
Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Item 2. Properties
------------------
As of December 31, 1994, the Registrant owns joint venture interests in the two
properties described below:
<PAGE>
Location Description of Property
-------- -----------------------
Cobb County, Georgia * Post Lake Apartments: a 484-unit apartment
complex located on approximately 60 acres.
Redwood City, California ** Redwood Shores Apartments: a 304-unit apartment
complex located on approximately 15 acres.
* Owned by the Registrant through a joint venture with affiliates.
** Owned by the Registrant through a joint venture with the seller and an
affiliate.
Each of the above properties is held subject to various mortgages and other
forms of financing.
In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for the properties in which it has joint venture interests.
See Notes to Financial Statements for other information regarding real property
investments.
Item 3. Legal Proceedings
-------------------------
The Registrant is not subject to any material pending legal proceedings nor
were any such proceedings terminated during the fourth quarter of 1994.
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1994.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
---------------------------------------------------------------------
Matters
-------
There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop; therefore, the
market value of the Limited Partnership Interests cannot reasonably be
determined. As anticipated, the Registrant has not made distributions to date
to investors. For additional information, see Item 7. - Management's Discussion
and Analysis of Financial Condition and Results of Operations.
As of December 31, 1994, the number of record holders of Limited Partnership
Interests of the Registrant was 690.
Item 6. Selected Financial Data
-------------------------------
Year ended December 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
Net loss $(479,754) $(436,167) $(481,508) $(770,618) $(743,509)
Net loss per
Limited Part-
nership Interest (67.05) (60.95) (67.29) (107.70) (103.91)
Total assets 1,009,834 1,453,169 1,919,258 2,459,673 3,420,254
Item 7. Management's Discussion and Analysis of Financial Condition and
-----------------------------------------------------------------------
Results of Operations
---------------------
Summary of Operations
---------------------
The operations of Balcor Growth Fund A Real Estate Investment for Capital
Appreciation (the "Partnership") are primarily comprised of the Partnership's
participation in the operations of the Post Lake and Redwood Shores apartment
complexes. Higher administrative expenses during 1994 resulted in an increase
in the net loss during 1994 as compared to 1993, while improved property
operations at Post Lake Apartments during 1993 resulted in a decrease in the
net loss during 1993 as compared to 1992. Further discussion of the
Partnership's operations is summarized below.
Operations
----------
1994 Compared to 1993
---------------------
The net loss from Post Lake Apartments decreased during 1994 as compared to
1993 primarily due to higher rental rates in 1994. This decrease in net loss
was partially offset by increased maintenance and repairs expenses due to the
exterior painting of the buildings during 1994.
The net loss from Redwood Shores Apartments increased slightly during 1994 as
compared to 1993 primarily due to an increase in administrative expenses, which
was the result of increased legal fees due to the potential refinancing of the
mortgage loan. Losses of the joint venture are allocated to the seller only to
the extent it makes any further capital contributions.
As a result of higher interest rates and outstanding affiliate loan balances in
1994, interest expense on the Partnership's short-term loan with an affiliate
<PAGE>
increased during 1994 as compared to 1993.
Primarily as a result of increased accounting and data processing fees,
administrative expenses increased during 1994 as compared to 1993.
1993 Compared to 1992
---------------------
The net loss from Post Lake Apartments decreased during 1993 as compared to
1992 primarily due to increased rental income resulting from higher rental
rates and increased occupancy levels. This increase was partially offset by
higher property operating expenses due to increased payroll expenses, and
higher repair and maintenance expenses as a result of exterior repairs and
improvements made at the property.
The net loss from Redwood Shores Apartments decreased during 1993 as compared
to 1992 primarily due to increased rental income resulting from higher rental
rates. In addition, depreciation expense decreased in 1993 as a result of
personal property being fully depreciated during 1992. However, the decrease in
the net loss was substantially offset by a decrease in the seller's
participation in losses of the joint venture. The seller's participation in
losses of the joint venture is limited to the extent of its capital account
balance, which was eliminated during the fourth quarter of 1992.
Primarily as a result of increased portfolio management and investor
communication fees, administrative expenses increased during 1993 as compared
to 1992.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership decreased as of December 31, 1994 as
compared to December 31, 1993. The Partnership's operating activities consisted
of the payment of Partnership administrative expenses; investing activities
consisted of the Partnership's share of the distributions from the Atlanta
Lakes Joint Venture and contributions to Redwood Partners; and financing
activities consisted of the distributions to the affiliated partner on the
Atlanta Lakes Joint Venture and borrowings from the General Partner.
The Partnership classifies the cash flow performance of the properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments. A deficit is considered to be
significant if it exceeds $250,000 annually or 20% of the property's rental and
service income. The Partnership defines cash flow generated from the properties
as an amount equal to the property's revenue receipts less property related
expenditures, which include debt service payments. During 1994 and 1993, Post
Lake Apartments generated positive cash flow while Redwood Shores Apartments
experienced a marginal cash flow deficit. During 1994 and 1993, the mortgage
financing on the Redwood Shores Apartments required principal payments of
$352,500 and $322,500, respectively, which caused the property's cash flow
deficits. The joint venture partners of Redwood Shores (Redwood Partners and
the seller) are required to fund their share of any cash flow deficit the
property generates.
While the cash flow of the properties in which the Partnership holds joint
venture interests has improved, the General Partner continues to pursue a
number of actions aimed at improving the cash flow of these properties
including refinancing of mortgage loans, improving property operating
performance, and seeking rent increases where market conditions allow.
Redwood Shores Apartments is located in the Redwood Shores Planned Unit
Development of Redwood City, California, along the western shores of San
Francisco Bay approximately halfway between San Francisco and San Jose. This is
an upscale community and surrounding area. There are approximately 400
competing apartment units within the Redwood Shores sub-market plus various
townhomes and condominiums, some of which also rent. The market rent of this
<PAGE>
higher-end product ranges between $980 and $1,600 per month for one and two
bedroom units, respectively. However, Redwood Shores Apartments, with smaller
square footage within its units and fewer amenities, competes more directly
with approximately 2,000 units of comparably priced product within the nearby
communities of San Mateo and Foster City. Current occupancy at Redwood Shores
is 97% while occupancy in the surrounding market for comparable apartment
complexes is 95%.
Post Lake Apartments is located in the northwest metropolitan area of Atlanta
in the submarket of Cobb County. Cobb County has a diverse apartment market,
catering to a wide range of apartment dwellers. Post Lake Apartments competes
with the higher-end product of this submarket with which it has comparable
rental rates. Current occupancy at Post Lake Apartments is 98% while occupancy
in the surrounding market for comparable apartment complexes is 96%. The
Atlanta market population continues to grow and thus, new rental units are
under construction and effective rents and market occupancy continue to
increase.
Each of the properties is owned through the use of third-party mortgage loan
financing and, therefore, the Partnership is subject to the financial
obligations required by such loans. See the supplemental financial information
for the joint ventures for information concerning outstanding balances,
maturity dates, interest rates, and other terms related to each of these
mortgage loans. The Partnership has no third-party financing which matures
prior to 1997. The General Partner is currently pursuing a refinancing of the
Redwood Shores mortgage note payable.
As of December 31, 1994, $731,645 is owed to the General Partner. The General
Partner may continue to provide additional short-term loans to the Partnership
for working capital or liquidity purposes, although there is no assurance that
such loans will be available. Should such short-term loans not be available,
the General Partner will seek alternative third party sources of financing
working capital. However, the current economic environment and its impact on
the real estate industry make it unlikely that the Partnership would be able to
secure financing from third parties to fund working capital needs or operating
deficits. Should additional borrowings be needed and not be available either
through the General Partner or third parties, the Partnership may be required
to dispose of one or both of its joint venture interests to satisfy these
obligations. The Partnership will need additional borrowings during 1995 to
fund its share of deficits at Redwood Shores Apartments. It is not expected
that the Partnership will generate substantial Net Cash Receipts, and any cash
flow that is generated is expected to be used to finance the Partnership's
share of improvements that are intended to enhance the value of the properties
and to repay General Partner advances.
The Redwood Shores and Post Lake apartment complexes may not currently be sold
on terms which are advantageous to the Partnership and it may be necessary for
the joint ventures to retain ownership of the properties for longer than the 5
to 9 year holding period originally projected in the Prospectus. In light of
results to date and current market conditions, there can be no assurance that
investors will recover all of their original investment.
The General Partner has recently completed the outsourcing of the financial
reporting and accounting services, transfer agent and investor records
services, and computer operations and systems development functions that
provided services to the Partnership. All of these functions are now being
provided by independent third parties. Each of these transactions occurred
after extensive due diligence and competitive bidding processes. The General
Partner does not believe that the cost of providing these services to the
Partnership, in the aggregate, will be materially different to the Partnership
during 1995 when compared to 1994.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
<PAGE>
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
Item 8. Financial Statements and Supplementary Data
---------------------------------------------------
See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
The net effect of the differences between the financial statements and the tax
returns is summarized as follows:
December 31, 1994 December 31, 1993
----------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
---------- --------- ---------- ---------
Total assets $1,009,834 $(1,431,185) $1,453,169 $(722,310)
Partners' capital
accounts (deficit):
General Partner (62,807) (711,681) (58,009) (554,463)
Limited Partners (196,513) (1,603,327) 278,443 (1,081,894)
Net loss:
General Partner (4,798) (157,218) (4,362) (281,391)
Limited Partners (474,956) (521,433) (431,805) (456,164)
Per Limited
Partnership
Interest (67.05) (73.61) (60.95) (64.39)
Item 9. Changes in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------
Financial Disclosure
--------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------
(a) Neither the Registrant nor Balcor Partners-XX, its General Partner, has a
Board of Directors.
(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
----- --------
Chairman, President and Chief Thomas E. Meador
Executive Officer
Executive Vice President, Allan Wood
Chief Financial Officer and
Chief Accounting Officer
Senior Vice President Alexander J. Darragh
First Vice President Daniel A. Duhig
First Vice President Josette V. Goldberg
First Vice President Alan G. Lieberman
First Vice President Brian D. Parker
and Assistant Secretary
First Vice President John K. Powell, Jr.
First Vice President Reid A. Reynolds
First Vice President Thomas G. Selby
Thomas E. Meador (July 1947) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a Director of The Balcor Company.
Prior to joining Balcor, Mr. Meador was employed at the Harris Trust and
Savings Bank in the commercial real estate division where he was involved in
various lending activities. Mr. Meador received his M.B.A. degree from the
Indiana University Graduate School of Business.
Allan Wood (January 1949) joined Balcor in August 1983 and, as Balcor's Chief
Financial Officer and Chief Accounting Officer, is responsible for the
financial and administrative functions. He is also a Director of The Balcor
Company. Mr. Wood is a Certified Public Accountant. Prior to joining Balcor,
he was employed by Price Waterhouse where he was involved in auditing public
and private companies.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and has
primary responsibility for the Portfolio Advisory Group. He is responsible for
due diligence analysis and real estate advisory services in support of asset
management, institutional advisory and capital markets functions. Mr. Darragh
has supervisory responsibility of Balcor's Investor Services, Investment
Administration, Fund Management and Land Management departments. Mr. Darragh
received masters' degrees in Urban Geography from Queens's University and in
Urban Planning from Northwestern University.
Daniel A. Duhig (October 1956) joined Balcor in November 1986 and is
responsible for the Asset Management Department relating to real estate
investments made by Balcor and its affiliated partnerships, including
negotiations for modifications or refinancings of real estate mortgage
investments and the disposition of real estate investments.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary
responsibility for all human resources matters. In addition, she has
supervisory responsibility for Balcor's administrative and MIS departments.
Ms. Goldberg has been designated as a Senior Human Resources Professional
<PAGE>
(SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
the Property Sales and Capital Markets Groups. Mr. Lieberman is a Certified
Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and is responsible for
Balcor's corporate and property accounting, treasury and budget activities.
Mr. Parker is a Certified Public Accountant and holds an M.S. degree in
Accountancy from DePaul University.
John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is
responsible for the administration of the investment portfolios of Balcor's
partnerships and for Balcor's risk management functions. Mr. Powell received a
Master of Planning degree from the University of Virginia. He has been
designated a Certified Real Estate Financier by the National Society for Real
Estate Finance and is a full member of the Urban Land Institute.
Reid A. Reynolds (April 1950) joined Balcor in March 1981 and is involved with
the asset management of residential properties for Balcor. Mr. Reynolds is a
licensed Real Estate Broker in the State of Illinois.
Thomas G. Selby (July 1955) joined Balcor in February 1984 and has
responsibility for various Asset Management functions, including oversight of
the residential portfolio. From January 1986 through September 1994, Mr. Selby
was Regional Vice President and then Senior Vice President of Allegiance Realty
Group, Inc., an affiliate of Balcor providing property management services.
Mr. Selby was responsible for supervising the management of residential
properties in the western United States.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1994.
Item 11. Executive Compensation
-------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of the General Partner. Certain of these
officers receive compensation from The Balcor Company (but not from the
Registrant) for services performed for various affiliated entities, which may
include services performed for the Registrant. However, the General Partner
believes that any such compensation attributable to services performed for the
Registrant is immaterial to the Registrant. See Note 6 of Notes to Financial
Statements for the information relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------
(a) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.
(b) Neither Balcor Partners-XX nor its officers and partners own as a group or
individually any Limited Partnership Interests of the Registrant.
Relatives and affiliates of the officers and partners of the General Partner
own 5 Interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------
<PAGE>
(a & b) See Note 6 of Notes to Financial Statements for information relating to
transactions with affiliates.
See Note 2 of Notes to Financial Statements for information relating to the
Partnership Agreement and the allocation of distributions and profits and
losses.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
-------------------------------------------------------------------------
(a)
(1 & 2) See the Indexes to the Financial Statements and Financial Statement
Schedules in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership
of Balcor Growth Fund A Real Estate Investment for Capital Appreciation,
previously filed as Exhibit 3 to Amendment No. 3 dated October 1, 1986 to the
Registrant's Registration Statement on Form S-11 (Registration No. 33-4963), is
incorporated herein by reference.
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 3
dated October 1, 1986 to the Registrant's Registration Statement on Form S-11
(Registration No. 33-4963) and Form of Confirmation regarding Interests in the
Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1992 (Commission File No. 0-15646) are incorporated
herein by reference.
(27) Financial Data Schedule of the Registrant for 1994 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1994.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedules: See the Indexes to the Financial Statements
and Financial Statement Schedules in this Form 10-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALCOR GROWTH FUND
A REAL ESTATE INVESTMENT FOR CAPITAL
APPRECIATION
By: /s/Allan Wood
---------------------------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Partners-XX, the
General Partner
Date: March 28, 1995
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------------------- ------------------------------- ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Partners-XX,
/s/Thomas E. Meador the General Partner March 28, 1995
---------------------- --------------
Thomas E. Meador
Executive Vice President and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Partners-XX,
/s/Allan Wood the General Partner March 28, 1995
---------------------- --------------
Allan Wood
<PAGE>
BALCOR GROWTH FUND
A REAL ESTATE INVESTMENT FOR CAPITAL APPRECIATION
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' (Deficit) Capital, for the years ended December 31,
1994, 1993 and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993
and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Balcor Growth Fund
A Real Estate Investment for Capital Appreciation:
We have audited the financial statements of Balcor Growth Fund A Real Estate
Investment for Capital Appreciation (An Illinois Limited Partnership) as listed
in the index of this Form 10-K. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Growth Fund A Real
Estate Investment for Capital Appreciation at December 31, 1994 and 1993, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 13, 1995
<PAGE>
BALCOR GROWTH FUND
A REAL ESTATE INVESTMENT FOR CAPITAL APPRECIATION
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
-------------- --------------
Cash and cash equivalents $ 37,514 $ 43,067
Investment in joint ventures with
affiliates 972,320 1,410,102
-------------- --------------
$ 1,009,834 $ 1,453,169
============== ==============
LIABILITIES AND PARTNERS' (DEFICIT) CAPITAL
Loan payable - affiliate $ 731,645 $ 695,645
Accounts payable 14,556 14,556
Due to affiliates 139,292 77,796
-------------- --------------
Total liabilities 885,493 787,997
Affiliate's participation in joint venture 383,661 444,738
Partners' (deficit) capital (7,084 Limited
Partnership Interests issued and
outstanding) (259,320) 220,434
-------------- --------------
$ 1,009,834 $ 1,453,169
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR GROWTH FUND
A REAL ESTATE INVESTMENT FOR CAPITAL APPRECIATION
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' (DEFICIT) CAPITAL
for the years ended December 31, 1994, 1993 and 1992
Partners' (Deficit) Capital Accounts
----------------------------------------------
General Limited
Total Partner Partners
-------------- -------------- --------------
Balance at December 31,
1991 $ 1,138,109 $ (48,832) $ 1,186,941
Net loss for the year
ended December 31, 1992 (481,508) (4,815) (476,693)
-------------- -------------- --------------
Balance at December 31, 1992 656,601 (53,647) 710,248
Net loss for the year
ended December 31, 1993 (436,167) (4,362) (431,805)
-------------- -------------- --------------
Balance at December 31, 1993 220,434 (58,009) 278,443
Net loss for the year
ended December 31, 1994 (479,754) (4,798) (474,956)
-------------- -------------- --------------
Balance at December 31,
1994 $ (259,320) $ (62,807) $ (196,513)
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR GROWTH FUND
A REAL ESTATE INVESTMENT FOR CAPITAL APPRECIATION
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
-------------- -------------- --------------
Expenses:
Interest on short-term
loan from an affiliate $ 40,003 $ 27,912 $ 30,661
Administrative 155,844 110,285 95,601
Participation in losses
of joint ventures with
affiliates 299,782 319,766 392,056
-------------- -------------- --------------
Total expenses 495,629 457,963 518,318
-------------- -------------- --------------
Loss before affiliate's
participation in loss
from joint venture (495,629) (457,963) (518,318)
Affiliate's participation in
loss from joint venture 15,875 21,796 36,810
-------------- -------------- --------------
Net loss $ (479,754) $ (436,167) $ (481,508)
============== ============== ==============
Net loss allocated to
General Partner $ (4,798) $ (4,362) $ (4,815)
============== ============== ==============
Net loss allocated to
Limited Partners $ (474,956) $ (431,805) $ (476,693)
============== ============== ==============
Net loss per Limited
Partnership Interest
(7,084 issued and
outstanding) $ (67.05) $ (60.95) $ (67.29)
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR GROWTH FUND
A REAL ESTATE INVESTMENT FOR CAPITAL APPRECIATION
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
-------------- -------------- --------------
Operating activities:
Net loss $ (479,754) $ (436,167) $ (481,508)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Affiliate's
participation in
loss from joint
venture (15,875) (21,796) (36,810)
Participation in
losses of joint
ventures with
affiliates 299,782 319,766 392,056
Net change in:
Accounts payable 2,013 (8,810)
Due to affiliates 61,496 28,605 25,459
-------------- -------------- --------------
Net cash used in operating
activities (134,351) (107,579) (109,613)
-------------- -------------- --------------
Investing activities:
Capital contributions to
joint venture with an
affiliate (37,000) (35,000)
Distributions from joint
ventures with affiliates 175,000 150,000 150,000
-------------- -------------- --------------
Net cash provided by
investing activities 138,000 115,000 150,000
-------------- -------------- --------------
Financing activities:
Proceeds from loan
payable - affiliate 36,000
Distributions to joint
venture partner -
affiliate (45,202) (38,744) (38,746)
-------------- -------------- --------------
Net cash used in financing
activities (9,202) (38,744) (38,746)
-------------- -------------- --------------
Net change in cash and
cash equivalents (5,553) (31,323) 1,641
Cash and cash equivalents
at beginning of year 43,067 74,390 72,749
-------------- -------------- --------------
Cash and cash equivalents
at end of year $ 37,514 $ 43,067 $ 74,390
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR GROWTH FUND
A REAL ESTATE INVESTMENT FOR CAPITAL APPRECIATION
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) Investment in joint ventures with affiliates represents the recording of
the Partnership's interests, under the equity method of accounting, in two
joint ventures with affiliated entities. Under the equity method of accounting,
the Partnership records its initial interests at cost and adjusts its
investment accounts for additional capital contributions, distributions and its
share of joint venture income or loss. Supplemental financial information for
the respective joint ventures is provided in the attached joint venture
financial statements.
(b) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(c) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income and loss in his
tax return; therefore, no provision for income taxes is made in the financial
statements of the Partnership.
(d) A reclassification has been made to the previously reported 1993 and 1992
statements in order to provide comparability with the 1994 statements. This
reclassification has not changed the 1993 and 1992 results.
2. Partnership Agreement:
The Partnership was organized in August 1985. The Partnership Agreement
provides for Balcor Partners-XX to be the General Partner and for the admission
of Limited Partners through the sale of up to 100,000 Limited Partnership
Interests at $1,000 per Interest, 7,084 of which were sold through October 2,
1987, the termination date of the offering.
The Partnership Agreement provides that profits and losses are allocated 99% to
the Limited Partners and 1% to the General Partner. One hundred percent of Net
Cash Receipts available for distribution shall be distributed to the holders of
Interests in proportion to their participating percentages as of the record
date for such distributions. There shall, however, be accrued for the benefit
of the General Partner as its distributive share from operations, an amount
equivalent to approximately 1% of the total Net Cash Receipts being
distributed, which will be paid only as a part of the General Partner's share
of distributed Net Cash Proceeds. This accrued distributive share along with
the General Partner's share of Net Cash Proceeds is subordinated to the receipt
by Limited Partners of certain levels of returns as defined in the Partnership
Agreement.
3. Investment in Joint Ventures with Affiliates:
(a) The Partnership, through Atlanta Lakes Investors (a partnership which
initially was wholly-owned by the Partnership), acquired a 50% joint venture
interest in Atlanta Lakes Joint Venture which owns Post Lake Apartments. The
remaining 50% joint venture interest is owned by Atlanta Lakes, Inc., an entity
managed by an affiliate of the General Partner. The Partnership did not raise
sufficient capital to enable it to retain its original ownership percentage of
Atlanta Lakes Investors without incurring additional mortgage financing. The
Partnership transferred 25.83% of its interest in Atlanta Lakes Investors to
another affiliate of the General Partner for 25.83% of the amount of the
Partnership's cash payments made in connection with the acquisition of the
property. During 1994, 1993 and 1992, Atlanta Lakes Investors received
$175,000, $150,000 and $150,000, respectively, representing its portion of
distributions from the joint venture.
<PAGE>
(b) The Partnership, through its ownership of Redwood Associates, owns a 50%
joint venture interest in Redwood Partners (the "Joint Venture"), a joint
venture between Redwood Associates and Sequoia Shores, Inc. (an entity managed
by an affiliate of the General Partner). The Joint Venture acquired a 70%
general partnership interest in an existing limited partnership which owns
Redwood Shores Apartments. During 1994 and 1993, Redwood Associates contributed
$37,000 and $35,000, respectively, to the joint venture.
4. Affiliate's Participation in Joint Venture:
Atlanta Lakes Investors is a joint venture between the Partnership and an
affiliated partnership that has investment objectives similar to the
Partnership. All assets, liabilities, income and expenses of the joint venture
(which owns a 50% equity investment in Atlanta Lakes Joint Venture) are
included in the financial statements of the Partnership with the appropriate
adjustment of profit or loss for the affiliate's participation in the joint
venture. Profits and losses are allocated 74.17% to the Partnership and 25.83%
to the affiliate. During 1994, 1993 and 1992, the joint venture partner was
paid distributions of $45,202, $38,744 and $38,746, respectively, as its share
of distributions received from Atlanta Lakes Joint Venture.
5. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, will differ from the
tax returns due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net loss for 1994 in the financial statements is $198,897 less than the tax
loss of the Partnership for the same period.
<PAGE>
6. Transactions with Affiliates:
Expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
-------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------ ------- ------ ------- ------ -------
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $36,741 $14,602 $27,597 $2,300 $30,515 $2,411
Data processing 17,018 3,322 5,158 368 8,477 634
Investor communica-
tions 11,974 2,708 9,434 786 2,518 199
Legal 2,512 528 487 41 481 38
Portfolio management 4,322 4,261 7,674 639 3,444 272
Other 3,408 325 1,770 119 75 6
As of December 31, 1994, $731,645 is owed to the General Partner, $36,000 of
which was borrowed during 1994. The Partnership incurred interest expense of
$40,003, $27,912 and $30,661 in 1994, 1993 and 1992, respectively. The
Partnership paid no interest expense during these years. As of December 31,
1994, interest expense of $113,546 is payable. Interest expense was computed at
the American Express Company cost of funds rate plus a spread to cover
administrative costs. As of December 31, 1994, this rate was 6.562%.
The General Partner may continue to provide short-term loans to the Partnership
to fund future working capital needs or operating deficits, although there is
no assurance that such loans will be available. Should such short-term loans
not be available, the General Partner will seek alternative third party sources
of financing working capital. However, the current economic environment and its
impact on the real estate industry make it unlikely that the Partnership would
be able to secure financing from third parties to fund working capital needs or
operating deficits. Should additional borrowings be needed and not be available
either through the General Partner or third parties, the Partnership may be
required to dispose of one or both of its joint venture interests to satisfy
these obligations.
<PAGE>
ATLANTA LAKES JOINT VENTURE
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Income and Expenses and Partners' Capital, for the years ended
December 31, 1994, 1993 and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation as of December 31, 1994
Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Atlanta Lakes Joint Venture
We have audited the financial statements and the financial statement schedule
of Atlanta Lakes Joint Venture (An Illinois General Partnership) as listed in
the index of this Form 10-K. These financial statements and the financial
statement schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Atlanta Lakes Joint Venture at
December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 13, 1995
<PAGE>
ATLANTA LAKES JOINT VENTURE
(An Illinois General Partnership)
BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
-------------- --------------
Cash and cash equivalents $ 47,918 $ 49,917
Escrow deposits 92,357 89,216
Accounts and accrued interest receivable 207,180 194,214
Deferred expenses, net of accumulated
amortization of $168,513 in 1994 and
$146,533 in 1993 51,286 73,266
-------------- --------------
398,741 406,613
-------------- --------------
Investment in real estate, at cost:
Land 3,794,165 3,794,165
Buildings and improvements 21,297,917 21,297,917
-------------- --------------
25,092,082 25,092,082
Less accumulated depreciation 6,970,136 6,316,843
-------------- --------------
Investment in real estate, net of
accumulated depreciation 18,121,946 18,775,239
-------------- --------------
$ 18,520,687 $ 19,181,852
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 3,112 $ 3,112
Security deposits 108,009 94,845
Mortgage note payable 15,415,878 15,617,286
-------------- --------------
Total liabilities 15,526,999 15,715,243
Partners' capital 2,993,688 3,466,609
-------------- --------------
$ 18,520,687 $ 19,181,852
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
ATLANTA LAKES JOINT VENTURE
(An Illinois General Partnership)
STATEMENTS OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
-------------- -------------- --------------
Income:
Rental and service $ 3,812,914 $ 3,634,210 $ 3,437,043
Interest on short-term
investments 6,393 7,037 10,678
-------------- -------------- --------------
Total income 3,819,307 3,641,247 3,447,721
-------------- -------------- --------------
Expenses:
Interest on mortgage note
payable 1,436,202 1,453,932 1,470,100
Depreciation 653,293 650,296 654,352
Amortization of deferred
expenses 21,980 21,980 21,980
Property operating 738,524 756,756 696,229
Maintenance and repairs 692,822 531,537 502,923
Real estate taxes 227,583 232,857 231,387
Property management fees 160,401 154,262 147,713
Administrative 11,423 8,395 8,054
-------------- -------------- --------------
Total expenses 3,942,228 3,810,015 3,732,738
-------------- -------------- --------------
Net loss (122,921) (168,768) (285,017)
Partners' capital at
beginning of year 3,466,609 3,935,377 4,520,394
Distributions to joint
venture partners (350,000) (300,000) (300,000)
-------------- -------------- --------------
Partners' capital at end of
year $ 2,993,688 $ 3,466,609 $ 3,935,377
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
ATLANTA LAKES JOINT VENTURE
(An Illinois General Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
-------------- -------------- --------------
Operating activities:
Net loss $ (122,921) $ (168,768) $ (285,017)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation of
property 653,293 650,296 654,352
Amortization of
deferred expenses 21,980 21,980 21,980
Net change in:
Escrow deposits (3,141) (4,835) (5,439)
Accounts and accrued
interest
receivable (12,966) (10,268) 185,497
Accounts payable 112 3,000
Security deposits 13,164 3,460 8,111
-------------- -------------- --------------
Net cash provided by
operating activities 549,409 491,977 582,484
-------------- -------------- --------------
Investing activity:
Improvements to property (89,891)
--------------
Net cash used in
investing activity (89,891)
--------------
Financing activities:
Distributions to joint
venture partners (350,000) (300,000) (300,000)
Principal payments on
mortgage note payable (201,408) (183,679) (167,509)
-------------- -------------- --------------
Net cash used in financing
activities (551,408) (483,679) (467,509)
-------------- -------------- --------------
Net change in cash and cash
equivalents (1,999) (81,593) 114,975
Cash and cash equivalents
at beginning of year 49,917 131,510 16,535
-------------- -------------- --------------
Cash and cash equivalents
at end of year $ 47,918 $ 49,917 $ 131,510
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
ATLANTA LAKES JOINT VENTURE
(An Illinois General Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) Depreciation expense is computed using the straight-line method. Rates used
in the determination of depreciation are based upon the following estimated
useful lives:
Years
-----
Buildings and improvements 30
Furniture and fixtures 5
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account. Atlanta Lakes Joint
Venture (the "Joint Venture") records its investment in real estate at cost,
and periodically assesses possible impairment to the value of the property. In
the event that the General Partner determines that a permanent impairment in
value has occurred, the carrying basis of the property is reduced to its
estimated fair value.
(b) Deferred expenses consist of loan financing fees which are amortized over
the term of the agreement.
(c) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(d) The Joint Venture is not liable for Federal income taxes and each partner
recognizes its proportionate share of the Joint Venture loss or income in its
tax return; therefore, no provision for income taxes is made in the financial
statements of the Joint Venture.
2. Joint Venture Agreement:
The Joint Venture was organized in December 1986 and provides for Atlanta Lakes
Investors, an Illinois limited partnership, and Atlanta Lakes, Inc., an
Illinois corporation, to be joint venturers (together, the "Partners"). Atlanta
Lakes Investors is owned by Balcor Growth Fund A Real Estate Investment for
Capital Appreciation ("BGF") and Balcor Employee Investment Partners-87. An
affiliate of the General Partner of BGF manages the business activities of
Atlanta Lakes, Inc.
The Joint Venture Agreement provides that each Partner will have a
participation percentage of 50% in the Joint Venture. Each item of income,
gain, loss, deduction or credit for each year will be allocated to the Partners
in accordance with their respective participation percentages. The Partners may
set aside as a reserve for contingencies and/or working capital, any portion of
Net Cash Receipts and/or Net Capital Proceeds which they reasonably deem
necessary or appropriate for the business of the Joint Venture. Net Cash
Receipts of the Joint Venture shall be distributed from time to time as the
Partners shall determine, in accordance with the Partners' respective
participation percentages. Net Capital Proceeds shall be distributed first, to
the repayment in full of any loans or advances made to the Joint Venture by any
Partner; and thereafter, to the Partners in accordance with their respective
participation percentages.
During 1994, 1993 and 1992, the Joint Venture distributed $350,000, $300,000
and $300,000, respectively, to its Partners.
3. Mortgage Note Payable:
The Joint Venture obtained first mortgage financing collateralized by Post Lake
<PAGE>
Apartments in the amount of $16,575,000. The mortgage note bears interest at
the rate of 9.25% and is payable in monthly installments of principal and
interest of $136,468 through May 1997, the maturity date of the loan. At
maturity, the Joint Venture will be required to make a balloon payment of
approximately $14,867,000, which will require the sale or refinancing of the
property.
Approximate maturities of the above mortgage note payable during each of the
next three years are summarized as follows:
1995 $ 221,000
1996 242,000
1997 14,953,000
During 1994, 1993, and 1992 the Joint Venture incurred and paid interest
expense on the mortgage note payable of $1,436,202, $1,453,932 and $1,470,100,
respectively.
4. Management Agreement:
Post Lake Apartments is managed by an affiliate of the seller for a management
fee of 4.25% of gross receipts. In addition, the manager is entitled to receive
20% of operating income in excess of the budgeted operating income for each
year up to an amount which, when added to the base monthly fee, equals 5.5% of
the gross receipts for Post Lake for such calendar year. The manager earned
$3,683 of additional management fees for 1993. The operating income did not
exceed the budgeted operating income in 1994 or 1992. The term of the agreement
continues until terminated by either party.
5. Tax Accounting:
The Joint Venture keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, will differ from the
tax returns due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net loss for 1994 in the financial statements is $268,131 less than the tax
loss of the Joint Venture for the same period.
<PAGE>
ATLANTA LAKES JOINT VENTURE
(An Illinois General Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1994
<CAPTION>
Col. A Col. B Col. C Col. D
--------------------- -------- -------------------- ---------------------------------
Initial Cost Cost Adjustments
to Partnership Subsequent to Acquisition
-------------------- ---------------------------------
Buildings Carrying Reduction
Encum- and Im- Improve- Costs of Basis
Description brances Land provements ments (b) (c)
--------------------- ------- -------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Post Lake Apartments, a
484-unit apt. complex
in Cobb County, GA (a) $3,875,000 $21,625,000 $124,654 $390,685 $(923,257)
========== =========== ======== ======== =========
</TABLE>
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1994
(Continued)
<CAPTION>
Col. A Col. E Col. F Col. G Col. H Col. I
------------------- -------------------------------- -------- -------- ------ --------------
Gross Amounts at Which Life Upon
Carried at Close of Period Which Depre-
-------------------------------- ciation in
Buildings Accumulated Date Date Latest Income
and Im- Total Deprecia- of Con- Acq- Statement
Description Land provements (d)(e) tion(e) struction uired is Computed
------------------- -------- ---------- ---------- --------- -------- ----- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Post Lake Apartments, a
484-unit apt. complex
in Cobb County, GA $3,794,165 $21,297,917 $25,092,082 $6,970,136 11/79 12/86 (f)
========== =========== =========== ==========
</TABLE>
<PAGE>
ATLANTA LAKES JOINT VENTURE
(An Illinois General Partnership)
NOTES TO SCHEDULE III
(a) See description of the mortgage note payable in Note 3 of Notes to
Financial Statements.
(b) Consists of acquisition and investigatory fees, legal fees, appraisal fees,
title costs and other related professional fees.
(c) Guaranteed income earned under the terms of the management agreement was
recorded by the Joint Venture as a reduction of the basis of the property.
(d) The aggregate cost of land, buildings, and improvements is the same for
Federal income tax purposes.
(e) Reconciliation of Real Estate
-----------------------------
1994 1993 1992
---------- ---------- ----------
Balance at beginning of year $25,092,082 $25,002,191 $25,002,191
Additions during the year:
Improvements 89,891
----------- ----------- ------------
Balance at close of year $25,092,082 $25,092,082 $25,002,191
=========== =========== ===========
Reconciliation of Accumulated Depreciation
------------------------------------------
1994 1993 1992
---------- ---------- ----------
Balance at beginning of year $6,316,843 $5,666,547 $5,012,195
Depreciation expense for the
year 653,293 650,296 654,352
---------- ---------- ----------
Balance at close of year $6,970,136 $6,316,843 $5,666,547
========== ========== ==========
(f) Depreciation expense is computed based upon the following estimated useful
lives:
Years
-----
Building and improvements 30
Furniture and fixtures 5
<PAGE>
REDWOOD PARTNERS
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Income and Expenses and Partners' (Deficit) Capital, for the
years ended December 31, 1994, 1993 and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and
1992
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation as of December 31, 1994
Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Redwood Partners
We have audited the financial statements and the financial statement schedule
of Redwood Partners (An Illinois General Partnership) as listed in the index of
this Form 10-K. These financial statements and the financial statement schedule
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Redwood Partners at
December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 13, 1995
<PAGE>
REDWOOD PARTNERS
(An Illinois General Partnership)
BALANCE SHEETS
December 31, 1994 and 1993
ASSETS
1994 1993
-------------- --------------
Cash and cash equivalents $ 9,887 $ 19,602
Bond reserve 2,478,000 2,478,000
Accounts and accrued interest receivable 204,228 223,250
-------------- --------------
2,692,115 2,720,852
-------------- --------------
Investment in real estate, at cost:
Land 6,043,941 6,043,941
Buildings and improvements 22,942,335 22,942,335
-------------- --------------
28,986,276 28,986,276
Less accumulated depreciation 6,598,769 5,868,117
-------------- --------------
Investment in real estate, net of
accumulated depreciation 22,387,507 23,118,159
-------------- --------------
$ 25,079,622 $ 25,839,011
============== ==============
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable $ 3,890 $ 3,890
Security deposits 115,565 119,810
Mortgage note payable 25,917,500 26,270,000
-------------- --------------
Total liabilities 26,036,955 26,393,700
Partners' deficit (957,333) (554,689)
-------------- --------------
$ 25,079,622 $ 25,839,011
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
REDWOOD PARTNERS
(An Illinois General Partnership)
STATEMENTS OF INCOME AND EXPENSES AND PARTNERS' (DEFICIT) CAPITAL
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
-------------- -------------- --------------
Income:
Rental and service $ 3,450,870 $ 3,437,041 $ 3,343,417
Interest on short-term
investments 303,404 302,390 310,904
-------------- -------------- --------------
Total income 3,754,274 3,739,431 3,654,321
-------------- -------------- --------------
Expenses:
Interest on mortgage note
payable 2,290,644 2,318,298 2,343,089
Depreciation 730,652 730,651 805,560
Property operating 616,924 591,584 546,832
Real estate taxes 286,438 282,440 279,319
Maintenance and repairs 180,480 182,163 202,601
Property management fees 138,142 137,530 132,715
Administrative 31,422 16,124 17,423
-------------- -------------- --------------
Total expenses 4,274,702 4,258,790 4,327,539
-------------- -------------- --------------
Loss before seller's
participation in loss of
joint venture (520,428) (519,359) (673,218)
Seller's participation in
loss of joint venture 43,784 48,593 174,122
-------------- -------------- --------------
Net loss (476,644) (470,766) (499,096)
Partners' (deficit) capital (554,689) (153,923) 345,173
at beginning of year
Contributions from
joint venture partners 74,000 70,000
-------------- -------------- --------------
Partners' deficit at end of
year $ (957,333) $ (554,689) $ (153,923)
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
REDWOOD PARTNERS
(An Illinois General Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
-------------- -------------- --------------
Operating activities:
Net loss $ (476,644) $ (470,766) $ (499,096)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Seller's participation
in loss from joint
venture (43,784) (48,593) (174,122)
Depreciation of
property 730,652 730,651 805,560
Net change in:
Accounts receivable 19,022 (20,772) 40,020
Accounts payable 140 3,750
Due to affiliate (506) (568)
Security deposits (4,245) (6,140) (4,670)
-------------- -------------- --------------
Net cash provided by
operating activities 225,001 184,014 170,874
-------------- -------------- --------------
Financing activities:
Capital contributions by
joint venture partners 74,000 70,000
Capital contributions by
joint venture partner -
seller 43,784 48,593 49,635
Principal payments on
mortgage note payable (352,500) (322,500) (300,000)
-------------- -------------- --------------
Net cash used in financing
activities (234,716) (203,907) (250,365)
-------------- -------------- --------------
Net change in cash and cash
equivalents (9,715) (19,893) (79,491)
Cash and cash equivalents
at beginning of year 19,602 39,495 118,986
-------------- -------------- --------------
Cash and cash equivalents
at end of year $ 9,887 $ 19,602 $ 39,495
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
REDWOOD PARTNERS
(An Illinois General Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) The financial statements include the accounts of Redwood Partners and its
70% general partnership interest in Redwood Shores Apartments Associates
("RSAA") on a consolidated basis. The 30% limited partnership interest owned by
the seller is allocated losses of RSAA to the extent of capital contributions
made.
(b) Depreciation expense is computed using the straight-line method. Rates used
in the determination of depreciation are based upon the following estimated
useful lives:
Years
-----
Buildings and improvements 30
Furniture and fixtures 5
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account. Redwood Partners (the
"Joint Venture") records its investments in real estate at cost, and
periodically assesses possible impairment to the value of the property. In the
event that the General Partner determines that a permanent impairment in value
has occurred, the carrying basis of the property is reduced to its estimated
fair value.
(c) Cash equivalents include all highly liquid investments with a maturity of
three months or less when purchased.
(d) The Joint Venture is not liable for Federal income taxes and each partner
recognizes its proportionate share of the Joint Venture loss or income in its
tax return; therefore, no provision for income taxes is made in the financial
statements of the Joint Venture.
2. Joint Venture Agreement:
The Joint Venture was organized in April 1987 and provides for Redwood
Associates, an Illinois limited partnership, and Sequoia Shores, Inc., an
Illinois corporation, to be joint venturers (together, the "Partners"). In
June 1987, the Joint Venture acquired a 70% general partnership interest in
RSAA, an existing California limited partnership which owns the Redwood Shores
Apartments in Redwood City, California. Redwood Associates is owned by Balcor
Growth Fund A Real Estate Investment for Capital Appreciation ("BGF"). An
affiliate of the General Partner of BGF manages the business activities of
Sequoia Shores, Inc.
The Joint Venture Agreement provides that each Partner will have a
participation percentage of 50% in the Joint Venture. Each item of income,
gain, loss, deduction or credit for each year will be allocated to the Partners
in accordance with their respective participation percentages. Joint Venture
distributions from all sources will also be made to the Partners in accordance
with their respective participation percentages.
3. Mortgage Note Payable:
RSAA assumed a $28,000,000 loan (the "Bond Loan") funded from the proceeds of
the sale of Multi-Family Housing Revenue Bonds, Series 1985B, issued by the
City of Redwood City, California, consisting of $2,370,000 in serial bonds and
$25,630,000 in term bonds. The Bond Loan is collateralized by a mortgage on the
Redwood Shores apartment complex. A bond reserve of $2,478,000 was established
with proceeds from the Bond Loan. Pursuant to the loan agreement, these amounts
<PAGE>
are invested in short-term investments and interest earned thereon accumulates
to the benefit of RSAA and is applied against the debt service payments on the
Bond Loan.
Principal and interest payments due on the Bond Loan reflect payments due to
the bondholders and are payable monthly in an amount equal to one-sixth of the
principal and interest due on the bonds semi-annually. The serial bonds
currently bear interest at a rate of 8.75% per annum payable semi-annually. The
remaining serial bonds of $185,000 and $195,000 mature April 1, 1995 and
October 1, 1995, respectively. The term bonds initially bear interest at the
rate of 8.75% per annum payable semi-annually. The term bonds are subject to
various redemption options and tender provisions pursuant to the terms of the
bond indenture. RSAA is obligated to make principal payments on the mortgage
note to the extent the bonds are redeemed or mature under these provisions.
Unless there is a prior redemption of all or a part of the bonds, principal of
approximately $16,820,000 will be due in September 2008, which will require the
sale or refinancing of the property.
Five year maturities assuming no prior redemption of the above mortgage note
payable are summarized as follows:
1995 $ 380,000
1996 410,000
1997 450,000
1998 490,000
1999 530,000
RSAA incurred and paid interest expense in 1994, 1993 and 1992 on the Bond Loan
of $2,290,644, $2,318,298 and $2,343,089, respectively.
4. Management and Guarantee Agreement:
An affiliate of the seller, the limited partner of RSAA, is managing the
property for a fee of 4% of gross rental receipts. The management agreement
extends through the sale date of the property unless terminated earlier by
mutual consent of the seller and the Joint Venture. In addition, Redwood
Partners receives a management fee of 1% of gross rental income plus $10,000
from RSAA.
5. Tax Accounting:
The Joint Venture keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, will differ from the
tax returns due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net loss for 1994 in the financial statements is $198,920 less than the tax
loss of the Joint Venture for the same period.
<PAGE>
REDWOOD PARTNERS
(An Illinois General Partnership)
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1994
<CAPTION>
Col. A Col. B Col. C Col. D
--------------------- -------- -------------------- ---------------------------------
Initial Cost Cost Adjustments
to Partnership Subsequent to Acquisition
-------------------- ---------------------------------
Buildings Reduction
Encum- and Im- Improve- Carrying of Basis
Description brances Land provements ments Costs (b)
--------------------- ------- -------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Redwood Shores
Apartments, a 304-
unit apt. complex
in Redwood City, CA (a) $6,390,422 $24,253,644 None None $(1,657,790)
========== =========== ===========
</TABLE>
<TABLE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
as of December 31, 1994
(Continued)
<CAPTION>
Col. A Col. E Col. F Col. G Col. H Col. I
------------------- -------------------------------- -------- -------- ------ --------------
Gross Amounts at Which Life Upon
Carried at Close of Period Which Depre-
--------------------------------- ciation in
Buildings Accumulated Date Date Latest Income
and Im- Total Deprecia- of Con- Acq- Statement
Description Land provements (c)(d) tion(d) struction uired is Computed
------------------- -------- ---------- ---------- --------- -------- ----- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Redwood Shores
Apartments, a 304-
unit apt. complex
in Redwood City, CA $6,043,941 $22,942,335 $28,986,276 $6,598,769 1986 6/87 (e)
========== =========== =========== ==========
</TABLE>
<PAGE>
REDWOOD PARTNERS
(An Illinois General Partnership)
NOTES TO SCHEDULE III
(a) See description of Mortgage Note Payable in Note 3 of Notes to Financial
Statements.
(b) Guaranteed income earned under the terms of the management and guarantee
agreement was recorded by the Joint Venture as a reduction of the basis of the
property.
(c) The aggregate cost of land for Federal income tax purposes is $6,607,981
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $16,007,658. The total of the above-mentioned is $22,615,639.
(d) Reconciliation of Real Estate
-----------------------------
1994 1993 1992
---------- ---------- ----------
Balance at beginning of year $28,986,276 $28,986,276 $28,986,276
----------- ----------- -----------
Balance at close of year $28,986,276 $28,986,276 $28,986,276
=========== =========== ===========
Reconciliation of Accumulated Depreciation
------------------------------------------
1994 1993 1992
---------- ---------- ----------
Balance at beginning of year $5,868,117 $5,137,466 $4,331,906
Depreciation expense for the
year 730,652 730,651 805,560
---------- ---------- ----------
Balance at close of year $6,598,769 $5,868,117 $5,137,466
========== ========== ==========
(e) Depreciation expense is computed based upon the following estimated useful
lives:
Years
-----
Buildings and improvements 30
Furniture and fixtures 5
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 38
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 38
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1010
<CURRENT-LIABILITIES> 885
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (259)
<TOTAL-LIABILITY-AND-EQUITY> 1010
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 284
<OTHER-EXPENSES> 156
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> (480)
<INCOME-TAX> 0
<INCOME-CONTINUING> (480)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (480)
<EPS-PRIMARY> (67.05)
<EPS-DILUTED> (67.05)
</TABLE>
