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 September 30, 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)
2355 Waukegan Road Suite A200
Bannockburn, Illinois 60015
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (708) 267-1600
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 .
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Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Balance Sheets
September 30, 1995 and December 31, 1994
1995
(Unaudited) 1994
Assets
Cash and cash equivalents $ 3,686,441 3,242,344
Accounts receivable, net of allowance for doubtful
accounts of $16,163 at September 30, 1995 and
$15,889 at December 31, 1994 76,489 72,413
Other 121,806 114,697
3,884,736 3,429,454
Mini-warehouse facilities, at cost:
Land 16,925,647 16,925,647
Buildings 36,544,292 36,456,425
Furniture, fixtures, and equipment 914,064 815,712
54,384,003 54,197,784
Less accumulated depreciation 12,258,329 11,122,653
Mini-warehouse facilities, net of accumulated
depreciation 42,125,674 43,075,131
$ 46,010,410 46,504,585
Liabilities and Partners' Capital
Accounts payable $ - 11,086
Due to affiliates 59,758 154,794
Accrued liabilities, principally
real estate taxes 594,859 382,684
Security deposits 78,302 93,321
Deferred income 397,590 344,561
Total liabilities 1,130,509 986,446
Partners' capital (256,904 Limited Partnership
Interests issued and outstanding) 44,879,901 45,518,139
$ 46,010,410 46,504,585
See accompanying notes to financial statements.
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Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Statements of Income
For the Three Months and Nine Months Ended September 30, 1995 and 1994
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Income:
Rental $ 2,267,978 2,195,791 6,585,687 6,287,895
Interest on short term
investments 38,142 34,408 108,279 62,925
2,306,120 2,230,199 6,693,966 6,350,820
Expenses:
Property operating 581,010 595,413 1,753,820 1,720,475
Depreciation and amortization 378,558 375,292 1,135,676 1,123,912
Property management fees 125,889 122,214 372,884 358,409
General and administrative 101,076 82,273 319,026 295,859
1,186,533 1,175,192 3,581,406 3,498,655
Net income $ 1,119,587 1,055,007 3,112,560 2,852,165
Limited Partners' share of net
income ($4.31 and $4.07 per
Interest for the quarter ended
September 30, 1995 and 1994,
respectively,and $11.99 and
$10.99 for the nine months ended
September 30, 1995 and 1994,
respectively) 1,108,391 1,044,457 3,081,434 2,823,643
General Partners' share of
net income 11,196 10,550 31,126 28,522
$ 1,119,587 1,055,007 3,112,560 2,852,165
Distributions to Limited Partners
($4.97 and $4.44 per Interest
for the quarter ended
September 30, 1995 and 1994,
respectively, and $14.60 and
$13.23 for the nine months ended
September 30, 1995 and 1994,
respectively) $ 1,276,813 1,140,654 3,750,798 3,398,841
See accompanying notes to financial statements.
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Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Statements of Cash Flows
For the Nine Months Ended September 30, 1995 and 1994
(Unaudited)
1995 1994
Operating activities:
Net income $ 3,112,560 2,852,165
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,135,676 1,123,912
Net change in:
Net accounts receivable (4,076) 20,171
Other assets (7,109)
(11,120)
Accounts payable (11,086) (9,125)
Due to affiliates (95,036) 32,094
Accrued liabilities 212,175 162,537
Security deposits (15,019) (33,354)
Deferred income 53,029 24,560
Net cash provided by operating
activities 4,381,114 4,161,840
Investing activities:
Additions to mini-warehouse facilities (186,219) (239,481)
Net cash used in investing activities (186,219) (239,481)
Financing activities:
Distributions to Limited Partners (3,750,798) (3,398,841)
Net cash used in financing activities (3,750,798) (3,398,841)
Net change in cash and cash equivalents 444,097 523,518
Cash and cash equivalents at beginning of period 3,242,344 2,648,551
Cash and cash equivalents at end of period $ 3,686,441 3,172,069
See accompanying notes to financial statements.
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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 ended September 30, 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 and nine months ended September 30, 1995 are:
Paid Payable
Quarter Nine months
Property management fees $ 127,789 450,086 $ 41,541
General and administrative
expenses 41,260 181,903 18,217
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 September 30, 1995 total approximately
$3,880,000, of which $3,543,000 is subordinated.
3) Subsequent Event
In October 1995, the Partnership paid $1,364,160 to the Limited
Partners representing the quarterly distribution for the third
quarter of 1995.
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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 the primary reason for the increase in net
income generated by the Partnership during the quarter and nine months
ended September 30, 1995 as compared to the same periods in 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 and property management fees increased for the quarter and
nine months ended September 30, 1995 as compared to the same periods 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, Midwestern 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
quarter and nine months ended September 30, 1995 as compared to the same
periods in 1994.
General and administrative expenses increased for the quarter and nine
months ended September 30, 1995 as compared to 1994 due to an increase in
professional fees.
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Liquidity and Capital Resources
The cash position of the Partnership increased from December 31, 1994 to
September 30, 1995 primarily due to improved operations at several of the
Partnership's properties.
In October 1995, the Partnership paid $1,364,160 ($5.31 per Interest) to
Limited Partners, representing the distribution for the third quarter of
1995. Quarterly distributions increased from $4.97 per Interest for the
first and second quarters of 1995 to $5.31 per Interest for the third
quarter of 1995 due to improved operating results at several of the
Partnership's mini-warehouse facilities. To date, the Partnership has
distributed $141.55 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
September 30, 1995, the General Partner's share of Net Cash Receipts
totaled approximately $3,880,000 of which $3,543,000 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 September 30, 1992 (Commission File No. 0-
15639) are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant
for the nine months ended September 30, 1995 is
attached hereto.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter
ended September 30, 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 D. Parker
Brian D. Parker,
Senior Vice President and Chief 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 13, 1995
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