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
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
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077
(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/Colonial Storage Income Fund - 86 (the "Registrant") is a
limited partnership formed in May 1986 under the laws of the
State of Illinois, which raised $64,226,000 from sales of Limited
Partnership Interests. The Registrant's operations consist
exclusively of investment in and operation of income-producing
mini-warehouse and office/warehouse facilities, and all financial
information included in this report relates to that industry
segment.
The principal purpose of the Registrant is to acquire and
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 Registrant acquired four mini-warehouse
properties in 1986 and seven mini-warehouse properties in 1987,
from affiliates of one of the General Partners. In addition, the
Registrant acquired from non-affiliated entities four mini-
warehouse facilities in 1987 and nine mini-warehouse facilities
in 1988.
The Partnership Agreement provides that the proceeds of any sale,
financing, or refinancing, will not be reinvested in new
acquisitions, except that net proceeds may be used to purchase or
finance improvements or additions to the Registrant's properties.
The real estate industry continues to experience cyclical
downturns in many cities and regions of the country.
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 devaluation of real estate in particular
markets. In light of the competitiveness in the rental markets,
the General Partners' goals have been to maintain high occupancy
levels, while increasing rents where possible, and to monitor and
control operating expenses and capital improvements.
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 Partners
are not aware of any potential liability due to environmental
issues or conditions that would be material to the Registrant.
The officers, directors, and employees of Balcor Storage
Partners-86 and Colonial Storage 86, Inc., the General Partners
of the Registrant, and their affiliates perform certain services
for the Registrant. The Registrant currently has 18 full time
and 45 part-time employees engaged in its operations.
<PAGE>
Item 2. Properties
As of December 31, 1994, the Registrant owns the properties described below:
Net
Rentable
Land Area No. of
Area (Square Rentable
Location (Acres) Feet) Spaces
201 Cobb Parkway
Marietta, Georgia 3.1 47,980 431
6390 Winchester Road
Memphis, Tennessee 2.3 39,444 360
5675 Summer Avenue
Memphis, Tennessee (1) 2.4 46,010 377
2064 Briarcliff
Atlanta, Georgia (2) 2.8 45,700 174
4333 Jackson Drive
Garland, Texas 3.1 72,572 612
321 East Buckingham Road
Garland, Texas 2.1 40,701 299
3218 South Garnett Road
Tulsa, Oklahoma 3.7 57,540 464
5708 Fort Caroline Road
Jacksonville, Florida 3.7 67,925 768
3401 Avenue K
Plano, Texas (3) 4.7 87,654 897
4301 and 4324 Poplar Level Road
Louisville, Kentucky 4.2 81,982 798
2719 Morse Road
Columbus, Ohio 4.3 62,190 518
5036 Cleveland Avenue
Fort Myers, Florida 5.0 65,086 583
3281 Western Branch Boulevard
Chesapeake, Virginia 5.5 75,201 747
2300 Kangaroo Drive
Durham, North Carolina 4.0 47,502 657
28 W 650 Roosevelt Road
Winfield, Illinois (4) 5.6 48,145 550
<PAGE>
1131 Semoran Boulevard
Casselberry, Florida 3.9 67,159 641
36 Pine Knoll Road
Greenville, South Carolina (5) 4.2 50,325 446
750 East Third Street
Lexington, Kentucky 3.3 55,700 450
1900 U.S. Highway 19 South
Tarpon Springs, Florida 5.4 80,732 748
7415 West Dean Road
Milwaukee, Wisconsin (6) 11.7 205,190 1,107
W229 N590 Foster Court and
N5 W22966 Bluemound Road
Waukesha, Wisconsin (7) 3.0 49,632 219
3120 Breckenridge Lane
Louisville, Kentucky 2.1 34,490 329
2275 South Semoran Boulevard
Orlando, Florida 1.9 30,050 345
11195 Alpharetta Highway
Roswell, Georgia 9.1 113,310 680
(1) The property consists of 374 units of mini-warehouse space
and 3 units of office/warehouse space.
(2) The property consists of 156 units of mini-warehouse space
and 18 units of office/warehouse space.
(3) The property consists of 855 units of mini-warehouse space
and 42 paved parking spaces.
(4) The property consists of 455 units of mini-warehouse space
and 95 parking spaces.
(5) The property consists of 433 units of mini-warehouse space
and 13 units of office/warehouse space.
(6) The property consists of 694 units of mini-warehouse space
and 413 paved parking spaces.
(7) The property consists of 209 units of mini-warehouse space
and 10 units of office/warehouse space.
In the opinion of the General Partners, the Registrant has provided for
adequate insurance coverage for its real estate investment properties.
<PAGE>
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. For
information regarding previous distributions, see Statements of Partners'
Capital, page F-5, and Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources, below.
As of December 31, 1994, the number of record holders of Limited
Partnership Interests of the Registrant was approximately 8,961.
<PAGE>
Item 6. Selected Financial Data
Year Ended December 31
1994 1993 1992 1991 1990
Rental income $ 8,385,428 7,703,850 7,174,918 6,837,782 6,620,103
Interest income $ 96,709 59,644 76,739 133,419 174,879
Net income $ 3,909,878 3,149,115 2,650,263 2,338,757 2,403,443
Net income per
Limited
Partnership
Interest $ 15.07 12.14 10.21 9.01 9.26
Taxable
income $ 4,243,760 3,483,158 3,019,741 2,737,570 2,789,741
Taxable
income per
Limited
Partnership
Interest $ 16.35 13.42 11.64 10.55 10.75
Cash and
cash
equivalents $ 3,242,344 2,648,551 2,611,021 2,391,363 2,432,503
Total mini-
warehouse
properties, net
of accumulated
depreciation $ 43,075,131 44,253,257 45,388,343 46,764,159 48,100,702
Total assets $ 46,504,585 47,121,971 48,385,013 49,914,775 51,645,621
Distributions
to Limited
Partners $ 4,596,013 4,385,352 4,236,355 4,141,081 4,411,042
Distributions
per Limited
Partnership
Interest $ 17.89 17.07 16.49 16.12 17.17
Properties
owned on
December 31 24 24 24 24 24
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Summary of Operations
Improved market conditions in cities where many of Balcor/Colonial Storage
Income Fund-86's (the "Partnership") properties are located as well as
increased rental income resulting from ongoing capital improvement programs
were primarily responsible for the increases in net income generated by the
Partnership in 1994, 1993 and 1992. No material events occurred during
these periods which significantly impacted the net income of the
Partnership. Further discussion of the Partnership's operations is
summarized below.
Operations
1994 Compared to 1993
Rental income increased during 1994 as compared to 1993 due to increased
occupancies and rental rates, particularly in Kentucky, Tennessee, Georgia
and Florida. As a result of this increase, property management fees also
increased during this period.
Due to higher interest rates and amounts available for investment, interest
income on short term investments increased during 1994 as compared to 1993.
Increased payroll and maintenance expenses resulted in an increase in
property operating expenses for 1994 as compared to 1993. Payroll expenses
increased due to an increase in incentive payments to property managers and
an increase in salary rates for new employees. Maintenance expenses
increased due primarily to snow removal in February and March at sites in
Wisconsin, Illinois, Ohio, Kentucky and Virginia.
The full amortization of non-compete agreements in 1993 resulted in a
decrease in depreciation and amortization expenses in 1994 as compared to
1993.
General and administrative expenses increased during 1994 as compared to
1993 primarily due to an increase in accounting and asset management costs.
1993 Compared to 1992
Rental income and, correspondingly, property management fees increased for
1993 as compared to 1992 due to increased occupancy levels and rental rates
at certain of the Partnership's mini-warehouse facilities, particularly
those located in Kentucky, Tennessee, Georgia and Virginia.
Due to lower interest rates during 1993, interest income on short-term
investments decreased during 1993 as compared to 1992.
Increases in legal fees and real estate taxes were the primary reasons for
the increase in property operating expenses during 1993 as compared to
1992. The increase in legal expense was due to a settlement in 1992 which
resulted in lower expenses for that year. Real estate taxes increased due
to an increase in the assessed value and rates at certain of the
Partnership's properties.
Depreciation and amortization decreased as non-compete agreements were
fully amortized during 1993.
Increased administrative salaries and portfolio management expenses
resulted in an increase in general and administrative expenses for 1993 as
compared to 1992.
Liquidity and Capital Resources
The cash position of the Partnership increased from December 31, 1993 to
December 31, 1994 as cash from operations exceeded distributions to Limited
Partners and capital expenditures. The Partnership's cash flow provided by
operating activities in 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 January 1995, the Partnership paid $1,197,172 ($4.66 per Interest) to
the Limited Partners, representing the distribution for the fourth 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 and
fourth quarters of 1994 due to improved operating results at several of the
Partnership's mini-warehouse facilities. To date, the Partnership has
distributed $126.31 per $250 Interest, of which $124.92 represents Net Cash
Receipts and $1.39 represents Net Cash Proceeds. 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 December 31, 1994, the General Partners' share of
Net Cash Receipts totaled approximately $3,472,000, of which $3,135,000 is
subordinated. The General Partners are entitled to receive such
subordinated amounts only from distributed Net Cash Proceeds.
The General Partners intend to retain on behalf of the Partnership cash
reserves deemed adequate to meet working capital requirements as they may
arise.
One of the General Partners has recently completed the outsourcing of the
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 Partners do 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 can be expected to increase operating costs and
replacement costs and may lead to increased rental revenue and real estate
values.
<PAGE>
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements on Page F-1 of 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 information is summarized as follows:
December 31, 1994 December 31, 1993
Financial Tax Financial Tax
Statements Return Statements Return
Total assets $ 46,504,585 57,361,197 47,121,971 57,644,701
Partners' capital accounts:
General Partners $ 178,093 199,771 138,994 157,333
Limited Partners $ 45,340,046 56,174,980 46,065,280 56,679,691
Net income:
General Partners $ 39,099 42,438 31,491 34,831
Limited Partners $ 3,870,779 4,201,322 3,117,624 3,448,327
Per Limited Partnership
Interest $ 15.07 16.35 12.14 13.42
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 Storage Partners-86, one of the
General Partners, has a Board of Directors.
The other General Partner, Colonial Storage 86, Inc., has a Board of
Directors. The sole member is James R. Pruett (see b, c, e, & f
below) who has been a director since the formation of Colonial Storage
86, Inc.
(b,c,
&e) The names, ages, and business experience of the executive officers and
significant employees of the General Partners of the Registrant are as
follows:
Balcor Storage Partners-86
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 (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.
Colonial Storage 86, Inc.
Name Title
James R. Pruett President, Vice President, Director
James N. Danford Secretary, Treasurer
James R. Pruett (September 1942) received his Bachelor of Science
degree from McMurry College in Abilene, Texas, in 1965. He is the
president, sole director, and sole shareholder of James R. Pruett,
Inc., one of the corporate general partners of Colonial Storage
Centers Group, Colonial Storage Centers Group II, and Colonial Storage
Centers Group III, the managing general partner of Colonial Storage
Centers I, Ltd. (Colonial I), Colonial Storage Centers II, Ltd.
(Colonial II) and Colonial Storage Centers III, Ltd. (Colonial III),
respectively. Mr. Pruett is also President and a Director of Colonial
Storage 85, Inc., which serves as a General Partner of Balcor/Colonial
Storage Income Fund - 85 (BCSIF-85). Mr. Pruett developed the first
Atlanta, Georgia, Colonial Self Storage mini-warehouse facility in
1972. Since that time, he has handled substantially all business
aspects of mini-warehouse development, construction, operation, and
management. Mr. Pruett has directed the site selection and
development or acquisition of numerous locations for mini-warehouses
and office warehouses, including the facilities of Colonial I,
Colonial II and Colonial III. Mr. Pruett is President and a Director
of Colonial Storage Management, Inc. ("CSM"), Colonial Properties
Management, Inc. ("CPM"), Colonial Storage Management 85, Inc.("CSM-
85), and Colonial Storage Management 86, Inc.("CSM-86), which manage
the properties of Colonial I and Colonial II, Colonial III, BCSIF-85,
and the Registrant, respectively.
James N. Danford (January 1959) received his Bachelor of Business
Administration degree from The University of Texas at Arlington.
Mr. Danford was a senior accountant with a public accounting firm
prior to joining Colonial Storage Centers in June of 1986.
Mr. Danford is a Certified Public Accountant, member of the Texas
Society of Certified Public Accountants, and is chief financial
officer of CSM-86, Colonial I, Colonial II, Colonial III, Registrant,
BCSIF-85, CSM, CPM, and CSM-85.
The sole director of Colonial Storage 86, Inc. is not a director in
any company with a class of securities registered pursuant to Section
12 of the Securities Exchange Act of 1934 or subject to the
requirements of Section 15 (b) of the Act or any company registered as
an investment company under the Investment Company Act of 1940, but is
a director of four other corporations which act as general partners of
limited partnerships which have a class of securities registered
pursuant to Section 12 of the Act.
(d) There is no family relationship between any of the foregoing officers
or director.
(f) To the best of the Registrant's knowledge, there have been no events
under any bankruptcy act, no criminal proceedings, and no judgements
or injunctions material to the evaluation of the ability and integrity
of any current director or executive officer of Colonial Storage
Management 86, Inc., Colonial Storage 86, Inc., or any current
executive officer of Balcor Storage Partners-86, during the past five
years.
<PAGE>
Item 11. Executive Compensation
(a,b,c,
d&e) The Registrant has not paid and does not propose to pay any
remuneration to the executive officers and directors of the General
Partners. Certain of these officers receive compensation from The
Balcor Company and Colonial Storage 86, Inc. (but not from the
Registrant) for services performed for various affiliated entities,
which may include services performed for the Registrant. However, the
General Partners believe that any such compensation attributable to
services performed for the Registrant is immaterial to the Registrant.
See Note 3 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) Balcor Storage Partners-86 and Colonial Storage 86, Inc. and their
officers and director own no Limited Partnership Interests in the
Registrant.
Relatives and affiliates of the officers or director of the General
Partners own twenty Limited Partnership Interests in the Registra-
nt.
(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
(a &
b) See Note 1 of Notes to Financial Statements for information relating
to the Partnership Agreement and the allocation of distributions and
profits and losses.
See Note 2 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
(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 Index to Financial Statements on page F-1 of this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of
Limited Partnership set forth as Exhibit 3 to Amendment No.
1 to the Registrant's Registration Statement on Form S-11
dated October 10, 1986, (Registration No. 33-6669) is
incorporated herein by reference.
(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
December 31, 1994 is attached hereto.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the quarter
ended December 31, 1994.
(c) Exhibits: See Item 14 (a)(3) above.
(d) Financial Statement Schedules: See Index to Financial Statements on
Page F-1 of this Form 10-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ James N. Danford
James N. Danford
Secretary/Treasurer (Principal
Financial and Accounting
Officer) of Colonial Storage 86,
Inc., a 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
/s/ Thomas E. Meador Storage Partners-86, a General Partner March 28, 1995
Thomas E. Meador
Executive Vice President, and Chief
Accounting and Financial Officer
(Principal Accounting and Financial
Officer) of Balcor Storage Partners-86,
/s/ Allan Wood a General Partner March 28, 1995
Allan Wood
President and Director of Colonial
/s/ James Pruett Storage 86 Inc., a General Partner March 28, 1995
James Pruett
Secretary/Treasurer (Principal Financial
and Accounting Officer) of Colonial
/s/ James N. Danford Storage 86, Inc., a General Partner March 28, 1995
James N. Danford
<PAGE>
Index to Financial Statements
Pages
Independent Auditors' Report F-2
Financial Statements:
Balance Sheets as of December 31, 1994 and 1993 F-3
Statements of Income, years ended December 31, 1994, 1993
and 1992 F-4
Statements of Partners' Capital, years ended December 31, 1994,
1993 and 1992 F-5
Statements of Cash Flows, years ended December 31, 1994, 1993
and 1992 F-6
Notes to Financial Statements F-7 to F-10
Schedules are omitted for the reason that they are inapplicable or equivalent
information has been included elsewhere herein.
<PAGE>
Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
The Partners
Balcor/Colonial Storage Income Fund - 86:
We have audited the financial statements of Balcor/Colonial Storage Income
Fund - 86 (an Illinois Limited Partnership) as listed in the accompanying
index. 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/Colonial Storage Income
Fund - 86 as of December 31, 1994 and 1993, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1994, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Fort Worth, Texas
February 9, 1995
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Balance Sheets
December 31, 1994 and 1993
1994 1993
Assets
Cash and cash equivalents $ 3,242,344 2,648,551
Accounts receivable, net of allowance for
doubtful accounts of $20,781 and $23,136 in
1994 and 1993, respectively 72,413 82,903
Other 114,697 137,260
3,429,454 2,868,714
Mini-warehouse facilities, at cost:
Land 16,925,647 16,925,647
Buildings 36,456,425 36,184,971
Furniture, fixtures and equipment 815,712 757,211
54,197,784 53,867,829
Less accumulated depreciation 11,122,653 9,614,572
Mini-warehouse facilities, net of
accumulated depreciation 43,075,131 44,253,257
$ 46,504,585 47,121,971
Liabilities and Partners' Capital
Accounts payable $ 11,086 18,149
Due to affiliates (note 2) 154,794 51,913
Accrued liabilities, principally real estate taxes 382,684 394,271
Security deposits 93,321 130,736
Deferred income 344,561 322,628
Total liabilities 986,446 917,697
Partners' capital (256,904 Limited Partnership
Interests issued and outstanding) 45,518,139 46,204,274
$ 46,504,585 47,121,971
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Statements of Income
Years ended December 31, 1994, 1993 and 1992
1994 1993 1992
Income:
Rental $ 8,385,428 7,703,850 7,174,918
Interest 96,709 59,644 76,739
8,482,137 7,763,494 7,251,657
Expenses:
Property operating 2,207,178 2,118,600 2,032,809
Depreciation and amortization 1,508,081 1,704,614 1,853,239
Property management fees (note 2) 477,153 447,627 419,535
General and administrative (note 2) 379,847 343,538 295,811
4,572,259 4,614,379 4,601,394
Net income $ 3,909,878 3,149,115 2,650,263
Limited Partners' share of net income
($15.07, $12.14 and $10.21 per
Interest for 1994, 1993 and 1992,
respectively) $ 3,870,779 3,117,624 2,623,760
General Partners' share of net income 39,099 31,491 26,503
$ 3,909,878 3,149,115 2,650,263
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Statements of Partners' Capital
Years ended December 31, 1994, 1993 and 1992
Limited General
Partners Partners Total
Balance at December 31, 1991 $ 48,945,603 81,000 49,026,603
Net income 2,623,760 26,503 2,650,263
Cash distributions
($16.49 per Interest) (4,236,355) - (4,236,355)
Balance at December 31, 1992 47,333,008 107,503 47,440,511
Net income 3,117,624 31,491 3,149,115
Cash distributions
($17.07 per Interest) (4,385,352) - (4,385,352)
Balance at December 31, 1993 46,065,280 138,994 46,204,274
Net income 3,870,779 39,099 3,909,878
Cash distributions
($17.89 per Interest) (4,596,013) - (4,596,013)
Balance at December 31, 1994 $ 45,340,046 178,093 45,518,139
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
1994 1993 1992
Operating activities:
Net income $ 3,909,878 3,149,115 2,650,263
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,508,081 1,704,614 1,853,239
Net change in:
Net accounts receivable 10,490 12,330 5,558
Other assets 22,563 (50,844) 38,546
Accounts payable (7,063) 7,442 (2,067)
Due to affiliates 102,881 10,402 (10,748)
Accrued liabilities (11,587) (63,197) 85,111
Security deposits (37,415) (27,874) (9,402)
Deferred income 21,933 46,422 (6,564)
Net cash provided
by operating activities 5,519,761 4,788,410 4,603,936
Investing activities:
Additions to mini-warehouse facilities (329,955) (365,528) (147,923)
Net cash used in investing activities (329,955) (365,528) (147,923)
Financing activities:
Distributions to Limited Partners (4,596,013) (4,385,352) (4,236,355)
Net cash used in financing activities (4,596,013) (4,385,352) (4,236,355)
Net change in cash and cash equivalents 593,793 37,530 219,658
Cash and cash equivalents at
beginning of year 2,648,551 2,611,021 2,391,363
Cash and cash equivalents at
end of year $ 3,242,344 2,648,551 2,611,021
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Notes to Financial Statements
December 31, 1994, 1993 and 1992
(1) Summary of Significant Accounting Policies
(a) Description of Partnership
Balcor/Colonial Storage Income Fund - 86 (the
"Partnership"), is a limited partnership formed in May 1986.
The Partnership Agreement provides that Balcor Storage
Partners-86 (an Illinois general partnership) and Colonial
Storage 86, Inc. (a Texas corporation) are the General
Partners of the Partnership and provides for the admission
of Limited Partners through the sale of up to 400,000
Limited Partnership Interests at $250 per Interest, of which
256,904 ($64,226,000) Limited Partnership Interests were
sold prior to the termination of the offering.
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 acquired
from affiliates four mini-warehouse facilities in 1986 and
seven mini-warehouse facilities in 1987. Additionally, the
Partnership acquired from nonaffiliated parties four mini-
warehouse facilities in 1987 and nine mini-warehouse
facilities in 1988.
(b) Allocation of Net Income and Profits
The Partnership Agreement provides that net income (after
a deduction for any incentive management fees) from
operations shall be allocated 99% and 1% to the Limited
Partners and General Partners, respectively.
Additionally, when a property is sold or otherwise disposed
of, the General Partners will be allocated profits equal to
the greater of 1% of total profits or the amount of Net
Cash Proceeds distributable to the General Partners from
the sale (in excess of subordinated Net Cash Receipts,
note 1(c)).
The remainder of the profits will be allocated to the Limited
Partners.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Notes to Financial Statements
(c) Cash Distributions
Net Cash Receipts available for distribution from operations
shall be distributed 90% to the Limited Partners and 10% to
the General Partners, 9% as a partnership incentive
management fee and 1% as their distributable share from
operations. Distributions from operations to the General
Partners are subordinated to receipt by the Limited Partners
of a Cumulative Distribution of 6% of Adjusted Original
Capital ($63,868,903 at December 31, 1994) during the first
twelve month period following the termination of the
offering of Interests, 8% during the second twelve month
period following the termination of the offering of Interests,
and 10% during each twelve month period thereafter.
Net Cash Proceeds from sales or refinancings shall be
distributed first to the Limited Partners until they have
received an amount equal to their Original Capital plus any
deferred portion of the Cumulative Distribution. If the
receipt of any portion of the General Partners' 10% share of
Net Cash Receipts from operations has been deferred
(approximately $3,135,000 has been deferred as of
December 31, 1994), then available Net Cash Proceeds shall
thereafter be distributed to the General Partners to the
extent of such deferred amounts. Thereafter, remaining Net
Cash Proceeds shall be distributed 85% to the Limited
Partners and 15% to the General Partners.
(d) Cash and Cash Equivalents
The Partnership considers all highly liquid investments with
maturities at date of purchase of three months or less to be
cash equivalents.
(e) Mini-Warehouse Facilities
Costs associated with the appraisal and acquisition of mini-
warehouse facilities are capitalized.
The buildings, furniture, fixtures and equipment are
depreciated using the straight-line method over their
estimated useful lives ranging from 5 to 25 years.
Maintenance and repairs are charged to expense when
incurred. Expenditures for improvements are charged to the
related asset account.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Notes to Financial Statements
The Partnership records its investments in real estate at
cost, and periodically assesses possible impairment to the
value of its properties. In the event that the General
Partners determine that a permanent impairment in value
has occurred, the carrying basis of the property is reduced to
its estimated fair value.
When properties are disposed of, the related costs and
accumulated depreciation will be removed from the
respective accounts, and any gain or loss on disposition will
be recognized in accordance with generally accepted
accounting principles.
(f) Income Taxes
Taxable income or loss of the Partnership is includable in
the income tax returns of the individual partners; therefore,
no provision for income taxes has been made in the
accompanying financial statements.
The tax bases of the Partnership's assets and liabilities
exceeded the amounts recorded in the Financial Statements
at December 31, 1994 and 1993, by $10,856,612 and
$10,522,730, respectively.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Notes to Financial Statements
(2) Transactions With Affiliates
The Partnership has an agreement with Colonial Storage Management 86,
Inc., an affiliate of Colonial Storage 86, Inc., a General Partner, to
supervise and direct the business and affairs associated with the mini-
warehouse and office/warehouse facilities for a fee 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 years ended December 31, 1994, 1993 and 1992, are:
1994 1993 1992
Paid Payable Paid Payable Paid Payable
Property
management
fees $ 396,555 118,743 444,086 38,145 421,204 34,604
General and
administrative
expenses $ 226,199 36,051 218,301 13,768 171,804 6,907
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 3242
<SECURITIES> 0
<RECEIVABLES> 72
<ALLOWANCES> 0
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<CURRENT-ASSETS> 3430
<PP&E> 54198
<DEPRECIATION> 11123
<TOTAL-ASSETS> 46505
<CURRENT-LIABILITIES> 987
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0
0
<OTHER-SE> 45518
<TOTAL-LIABILITY-AND-EQUITY> 46505
<SALES> 0
<TOTAL-REVENUES> 8482
<CGS> 0
<TOTAL-COSTS> 2684
<OTHER-EXPENSES> 1888
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