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 September 30, 1994
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: 0-15639
Balcor/Colonial Storage Income Fund - 86
(Exact name of registrant as specified in its charter)
Illinois 36-3435425
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
Balcor Plaza
4849 Golf Road
Skokie, Illinois 60077
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (708) 677-2900
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 .
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Balance Sheets
September 30, 1994 and December 31, 1993
1994
(Unaudited) 1993
Assets
Cash and cash equivalents $ 3,172,069 2,648,551
Accounts receivable, net of allowance for doubtful
accounts of $25,051 at September 30, 1994 and
$23,136 at December 31, 1993 67,941 82,903
Accrued interest receivable 430 5,639
Other 142,741 131,621
3,383,181 2,868,714
Mini-warehouse facilities, at cost:
Land 16,925,647 16,925,647
Buildings 36,390,165 36,184,971
Furniture, fixtures, and equipment 791,498 757,211
54,107,310 53,867,829
Less accumulated depreciation 10,738,484 9,614,572
Mini-warehouse facilities, net of accumulated
depreciation 43,368,826 44,253,257
$46,752,007 47,121,971
Liabilities and Partners' Capital
Accounts payable $ 9,024 18,149
Due to affiliates 84,007 51,913
Accrued liabilities, principally real estate taxes 556,808 394,271
Security deposits 97,382 130,736
Deferred income 347,188 322,628
Total liabilities 1,094,409 917,697
Partners' capital (256,904 Limited Partnership
Interests issued and outstanding) 45,657,598 46,204,274
$46,752,007 47,121,971
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Statements of Income
For the Three Months and Nine Months Ended September 30, 1994 and 1993
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Income:
Rental $ 2,195,791 2,002,232 6,287,895 5,730,047
Interest on short term
investments 34,408 13,049 62,925 40,092
2,230,199 2,015,281 6,350,820 5,770,139
Expenses:
Property operating 595,413 613,989 1,720,475 1,662,829
Depreciation and
amortization 375,292 414,338 1,123,912 1,311,098
Property management
fees 122,214 115,308 358,409 332,503
General and
administrative 82,273 76,928 295,859 258,470
1,175,192 1,220,563 3,498,655 3,564,900
Net income $ 1,055,007 794,718 2,852,165 2,205,239
Limited Partners' share
of net income ($4.07
and $3.06 per Interest
for the three months
ended September 30,
1994 and 1993,
respectively, and
$10.99 and $8.50 per
Interest for the nine
months ended
September 30, 1994 and
1993, respectively) $ 1,044,457 786,771 2,823,643 2,183,187
General Partners' share
of net income 10,550 7,947 28,522 22,052
$ 1,055,007 794,718 2,852,165 2,205,239
Distributions to Limited
Partners ($4.44 and
$4.26 per Interest for
the three months ended
September 30, 1994 and
1993, respectively,
and $13.23 and $12.72
per Interest for the
nine months ended
September 30, 1994 and
1993, respectively) $ 1,140,654 1,094,411 3,398,841 3,267,818
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Statements of Cash Flows
For the Nine Months Ended September 30, 1994 and 1993
(Unaudited)
1994 1993
Operating activities:
Net income $ 2,852,165<PAGE>
2,205,239
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,123,912 1,311,098
Net change in:
Net accounts receivable 20,171 2,014
Other assets (11,120) (97,245)
Accounts payable (9,125) (6,250)
Due to affiliates 32,094 7,456
Accrued liabilities 162,537 94,600
Security deposits (33,354) 270
Deferred income 24,560 24,154
Net cash provided by operating
activities 4,161,840 3,541,336
Investing activities:
Additions to mini-warehouse facilities (239,481) (263,300)
Net cash used in investing activities (239,481) (263,300)
Financing activities:
Distributions to Limited Partners (3,398,841) (3,267,818)
Net cash used in financing activities (3,398,841) (3,267,818)
Net change in cash and cash equivalents 523,518 10,218
Cash and cash equivalents at beginning of period 2,648,551 2,611,021
Cash and cash equivalents at end of period $ 3,172,069 2,621,239
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Notes to Financial Statements
1) Summary of Significant Accounting Policies
In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the nine
months and quarter ended September 30, 1994, and all such adjustments are
ofa normal and recurring nature.
2) Transactions with Affiliates
The Partnership has an agreement with an affiliate of Colonial Storage 86,
Inc., to supervise and direct the business and affairs associated with the
mini-warehouse and office/warehouse facilities for fees of 6% and 5%,
respectively, of the gross revenues of the facilities.
Fees and expenses paid and payable by the Partnership to affiliates for the
quarter and nine months ended September 30, 1994, are:
Paid Payable
Quarter Nine Months
Property management fees $ 122,334 356,250 40,303
General and administrative
expenses $ 39,265 143,258 43,704
The General Partners are entitled to 10% of Net Cash Receipts
available for distribution, subject to subordination in the periods
following the termination of the offering, which from the inception of
the offering through September 30, 1994, totaled approximately
$3,339,000, of which $3,002,000 is subordinated.
3) Subsequent Event
In October 1994, the Partnership paid $1,197,172 to the Limited
Partners representing the quarterly distribution for the third quarter
of 1994.
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor/Colonial Storage Income Fund - 86 (the "Partnership") is a limited
partnership formed in May 1986. The principal purpose of the Partnership
is to acquire, develop, own, maintain, operate, lease, and hold for capital
appreciation and current income mini-warehouse facilities offering storage
space for business and personal use and office/warehouses offering a
combination of office and commercial warehouse space. The Partnership
raised $64,226,000 through the sale of Limited Partnership Interests and
utilized these proceeds to acquire 24 mini-warehouse facilities. The
Partnership continues to own and operate these 24 mini-warehouse
facilities.
Inasmuch as the management's discussion and analysis below relates
primarily to the time period since the end of the last fiscal year,
investors are encouraged to review the financial statements and the
management's discussion and analysis contained in the annual report for
1993 for a more complete understanding of the Partnership's financial
position.
Operations
Summary of Operations
Improved market conditions in cities where many of the Partnership's
properties are located as well as an ongoing capital improvement program
were primarily responsible for the increase in net income generated by the
Partnership in the quarter and nine months ending September 30, 1994 as
compared to the same periods in 1993. No material events occurred in 1993
or 1994 which significantly impacted the net income of the Partnership.
Further discussion of the Partnership's operations is summarized below.
1994 Compared to 1993
Rental income and accordingly property management fees increased for the
quarter and nine months ended September 30, 1994 as compared to the same
periods in 1993 due to increased occupancy levels and rental rates at
certain of the Partnership's mini-warehouse facilities, particularly those
located in Georgia and the Eastern and Florida regions.
As a result of an increase in funds available for investment, interest
income on short-term investments increased during the quarter and nine
months ended September 30, 1994 as compared to the same periods in 1993.
Higher payroll and maintenance expenses resulted in an increase in property
operating expenses for the nine months ended September 30, 1994 as compared
to the same period in 1993. Payroll expenses increased due to an increase
in incentive payments to property managers. Maintenance increased
primarily due to increased snow removal expenses in the first quarter at
the Wisconsin and Illinois locations. These increases were partially
offset by a decrease in real estate taxes and advertising.
Amortization costs were fully amortized during 1994 resulting in a
reduction in depreciation during the quarter and nine months ended
September 30, 1994 as compared to the same periods in 1993.
Higher payroll and portfolio management fees resulted in an increase in
general and administrative expenses for the quarter and nine months ended
September 30, 1994 as compared to the same period in 1993.
Liquidity and Capital Resources
The cash or near cash position of the Partnership increased from December
31, 1993 to September 30, 1994. The Partnership's cash flow provided by
operating activities in the first half of 1994 was generated primarily by
the operations of the mini-warehouse properties and interest income earned
on the Partnership's short-term investments, which was partially offset by
administrative expenses. This cash flow was used in investing activities
to make capital improvements to the properties and in financing activities
to provide distributions to the Limited Partners.
In October 1994, the Partnership paid $l,197,172 ($4.66 per Interest) to
the Limited Partners, representing the distribution for the third quarter
of 1994. Quarterly distributions increased from $4.44 per Interest for the
first and second quarters of 1994 to $4.66 per Interest for the third
quarter due to improved operating results at several of the Partnership's
mini-warehouse facilities. The General Partners believe the cash generated
from property operations should enable the Partnership to continue making
quarterly distributions to Limited Partners. However, the level of future
cash distributions to Limited Partners will be dependent upon the amount of
cash flow generated by the Partnership's properties as to which there can
be no assurance. Pursuant to the Partnership Agreement, the General
Partners are entitled to 10% of Net Cash Receipts available for
distribution, subject to certain subordinations in the periods following
the termination of the offering. From the inception of the offering
through September 30, 1994, the General Partners' share of Net Cash
Receipts totaled approximately $3,339,000 of which $3,002,000 is
subordinated. The General Partners are entitled to receive such
subordinated amounts only from distributed Net Cash Proceeds after certain
subordinates levels are met.
The General Partners intend to retain on behalf of the Partnership cash
reserves deemed adequate to meet working capital requirements as they may
arise.
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 can be expected to increase operating costs and
replacement costs and may lead to increased rental revenues and real estate
values.
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(4) Form of Subscription Agreement previously filed as
Exhibit 4.1 included in the amendment No. 1 to the
Registrant's Registration Statement on Form S-11
dated October 10, 1986 (Registration No. 33-6669) and
Form of Confirmation regarding Interst in the
Registrant set forth as Exhibit 4.2 to the
Registrant's Report on Form 10-Q for the quarter
ended June 30, 1993 (Commission File No. 0-15639) are
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the
nine month period ending September 30, 1994 is
attached hereto.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter
ended September 30, 1994.<PAGE>
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.
Balcor/Colonial Storage Income Fund -86
By: /s/ Thomas E. Meador
Thomas E. Meador,
President and Chief Operating
Officer (Principal Operating
Officer) of Balcor Storage
Partners-86, a General Partner
By: /s/ Allan Wood
Allan Wood,
Executive Vice President and
Chief Accounting and Financial
Officer (Principal Accounting
and Financial Officer) of Balcor
Storage Partners-86, a General
Partner
By: /s/ James Pruett
James Pruett,
President and Director of
Colonial Storage 86, Inc., a
General Partner
By: /s/ James N. Danford
James N. Danford,
Secretary/Treasurer (Principal
Financial and Accounting
Officer) of Colonial Storage 86,
Inc., a General Partner
Date: November 11, 1994
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 3172
<SECURITIES> 0
<RECEIVABLES> 68
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3383
<PP&E> 54107
<DEPRECIATION> 10739
<TOTAL-ASSETS> 46751
<CURRENT-LIABILITIES> 1094
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 45657
<TOTAL-LIABILITY-AND-EQUITY> 46751
<SALES> 0
<TOTAL-REVENUES> 6351
<CGS> 0
<TOTAL-COSTS> 2079
<OTHER-EXPENSES> 1420
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2852
<INCOME-TAX> 0
<INCOME-CONTINUING> 2852
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2852
<EPS-PRIMARY> 10.99
<EPS-DILUTED> 10.99
</TABLE>
