FORM 10-Q
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, 1995
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
March 31, 1995 and December 31, 1994
1995
(Unaudited) 1994
Assets
Cash and cash equivalents $ 3,253,153 3,242,344
Accounts receivable, net of allowance for doubtful
accounts of $9,503 at March 31, 1995 and
$20,781 at December 31, 1994 59,159 72,413
Other 131,907 114,697
3,444,219 3,429,454
Mini-warehouse facilities, at cost:
Land 16,925,647 16,925,647
Buildings 36,497,052 36,456,425
Furniture, fixtures, and equipment 843,701 815,712
54,266,400 54,197,784
Less accumulated depreciation 11,501,211 11,122,653
Mini-warehouse facilities, net of accumulated
depreciation 42,765,189 43,075,131
$ 46,209,408 46,504,585
Liabilities and Partners' Capital
Accounts payable $ - 11,086
Due to affiliates 107,486 154,794
Accrued liabilities, principally real estate taxes 330,204 382,684
Security deposits 86,520 93,321
Deferred income 391,221 344,561
Total liabilities 915,431 986,446
Partners' capital (256,904 Limited Partnership
Interests issued and outstanding) 45,293,977 45,518,139
$ 46,209,408 46,504,585
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Statements of Income
For the Three Months Ended March 31, 1995 and 1994
(Unaudited)
1995 1994
Income:
Rental $ 2,113,530 1,986,620
Interest on short term investments 32,399 15,161
2,145,929 2,001,781
Expenses:
Property operating 552,224 585,004
Depreciation and amortization 378,558 373,952
Property management fees 122,992 116,416
General and administrative 119,149 113,553
1,172,923 1,188,925
Net income $ 973,006 812,856
Limited Partners' share of net income ($3.75 and
$3.13 per Interest for the three months ended
March 31, 1995 and 1994, respectively) $ 963,276 804,727
General Partners' share of net income 9,730 8,129
$ 973,006 812,856
Distribution to Limited Partners ($4.66 and $4.35
per Interest for the three months ended
March 31, 1995 and 1994, respectively) $ 1,197,168 1,117,533
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Statements of Cash Flows
For the Three Months Ended March 31, 1995 and 1994
(Unaudited)
1995 1994
Operating activities:
Net income $ 973,006 812,856
Adjustments to reconcile net income to net cash
provided byoperating activities:
Depreciation and amortization 378,558 373,952
Net change in:
Net accounts receivable 13,254 25,291
Other assets (17,210) 16,771
Accounts payable (11,086) 6,763
Due to affiliates (47,308) 36,311
Accrued liabilities (52,480) (31,664)
Security deposits (6,801) (15,454)
Deferred income 46,660 20,364
Net cash provided by operating
activities 1,276,593 1,245,190
Investing activities:
Additions to mini-warehouse facilities (68,616) (18,986)
Net cash used in investing activities (68,616) (18,986)
Financing activities:
Distribution to Limited Partners (1,197,168) (1,117,533)
Net cash used in financing activities (1,197,168) (1,117,533)
Net change in cash and cash equivalents 10,809 108,671
Cash and cash equivalents at beginning of period 3,242,344 2,648,551
Cash and cash equivalents at end of period $ 3,253,153 2,757,222
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
three months ended March 31, 1995, and all such adjustments are of a
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 ended March 31, 1995 are:
Paid Payable
Property management fees $198,105 $43,630
General and administrative expenses 30,037 63,856
The General Partners are entitled to 10% of Net Cash Receipts
available for distribution, subject to certain subordination levels
following the termination of the offering, which from the inception of
the offering through March 31, 1995 totaled approximately $3,605,000
of which $3,268,000 is subordinated.
3) Subsequent Event
In April 1995, the Partnership paid $1,276,813 to the Limited Partners
representing the quarterly distribution for the first quarter of 1995.
<PAGE>
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 from affiliates 4 mini-warehouse
facilities in December 1986 and 7 mini-warehouse facilities in March 1987.
Additionally, the Partnership acquired from non-affiliated parties 4 mini-
warehouse facilities in 1987 and 9 mini-warehouse facilities in 1988. 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
1994 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 were primarily responsible for the increase in net
income generated by the Partnership in the first quarter of 1995 as
compared to the first quarter of 1994. No material events occurred in 1994
or 1995 which signficantly impacted the net income of the Partnership.
Further discussion of the Partnership's operations is summarized below.
1995 Compared to 1994
Rental income increased for the first quarter of 1995 as compared to the
same period in 1994 due to increased occupancy levels and rental rates at
certain of the Partnership's mini-warehouse facilities, particularly those
located in the Georgia, Eastern and Florida regions.
As a result of increases in interest rates and funds available for
investment, interest income on short-term investments increased during the
three months ended March 31, 1995 as compared to the same period in 1994.
Higher payroll expenses were more than offset by lower maintenance and bad
debt expenses resulting in a decrease in property operating expenses for
three months ended March 31, 1995 as compared to the same period in 1994.
Payroll expenses increased due to an increase in incentive payments to
property managers. Maintenance decreased primarily due to decreased snow
removal expenses at the Wisconsin and Illinois locations. Bad debt expense
decreased due to the improvement of collections of delinquent accounts.
Liquidity and Capital Resources
The cash or near cash position of the Partnership increased from December
31, 1994 to March 31, 1995. The Partnership's cash flow provided by
operating activities in the first quarter of 1995 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 April 1995, the Partnership paid $1,276,813 ($4.97 per Interest) to the
Limited Partners, representing the distribution for the first quarter of
1995. Quarterly distributions increased from $4.66 per Interest for the
third and fourth quarters of 1994 to $4.97 per Interest for the first
quarter of 1995 due to improved operating results at several of the
Partnership's mini-warehouse facilities. To date the Partnership has
distributed $131.28 per $250 Interest. 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 subordination levels following the
termination of the offering. From the inception of the offering through
March 31, 1995, the General Partner's share of Net Cash Receipts totaled
approximately $3,605,000 of which $3,218,000 is subordinated. The General
Partners are entitled to receive such subordinated amounts only from
distributed Net Cash Proceeds after subordination 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.
<PAGE>
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 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. 0-15639) are incorporated herein
by reference.
(27) Financial Data Schedule of the Registrant for the year
ended March 31, 1995 is attached hereto.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
March 31, 1995.
<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 Executive Officer
(Principal Executive Officer) of Balcor
Storage Partners-86, a General Partner
By: /s/ Brian Parker
Brian Parker,
Senior 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: May 12, 1995
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<S> <C>
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<PERIOD-END> MAR-31-1995
<CASH> 3253
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<ALLOWANCES> 0
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<CURRENT-ASSETS> 3444
<PP&E> 54266
<DEPRECIATION> 11501
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<CURRENT-LIABILITIES> 915
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0
0
<OTHER-SE> 45294
<TOTAL-LIABILITY-AND-EQUITY> 46209
<SALES> 0
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<CGS> 0
<TOTAL-COSTS> 675
<OTHER-EXPENSES> 498
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 973
<INCOME-TAX> 0
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