UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(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, 1995
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
2355 Waukegan Road Suite A200 Bannockburn, Illinois 60015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 267-1600
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
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 and increased
rental income resulting from ongoing capital improvement programs were
primarily responsible for the increases in net income generated by the
Partnership in 1995, 1994 and 1993. 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
1995 Compared to 1994
Rental income increased during 1995 when compared to 1994 primarily due to
increased rental rates of approximately 11.3% in Georgia and approximately 6% in
Florida. Property management fees, which are 6% of gross mini-warehouse rents
and 5% of gross office warehouse rents, increased correspondingly.
Interest income on short term investments increased from 1994 to 1995 due to an
increase in cash available for investment and higher interest rates.
1994 Compared to 1993
Rental income increased during 1994 as compared to 1993 due to an increase in
average rental rates of approximately 6.4%. Growth was particularly strong 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
approximately 18% due to an increase in incentive payments to property managers
and an increase in salary rates for new employees. Maintenance expenses
increased approximately 17% 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.
Liquidity and Capital Resources
The cash position of the Partnership increased from December 31, 1994 to
December 31, 1995. The Partnership's cash flow provided by operating activities
in 1995 was generated primarily by the operations of the mini-warehouse and
office-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.
Accounts receivable net of the related allowance for doubtful accounts
increased from December 31, 1994 to December 31, 1995 due to the level and
timing of collection efforts. The timing of collection efforts are determined
by individual state law. There have been no changes in the credit terms
extended to the Partnership's customers nor in the method used to allow for
doubtful accounts.
In January 1996, the Partnership paid $1,446,370 ($5.63 per Interest) to the
Limited Partners, representing the distribution for the fourth quarter of 1995.
Quarterly distributions increased from $5.31 per Interest for the third quarter
of 1995 to $5.63 per Interest for the fourth quarter of 1995 due to improved
operating results at several of the Partnership's mini-warehouse facilities.
Including the January 1996 distribution, the Partnership has distributed
$147.18 per $250 Interest, of which $145.80 represents Net Cash Receipts and
$1.38 represents Net Cash Proceeds. It is anticipated that, in the event the
sale of the Partnership's mini-warehouse facilities as discussed in Item 1 is
consummated, Net Cash Proceeds and remaining Net Cash Receipts from operations
prior to closing will be distributed to the Limited and General Partners in
accordance with the Partnership Agreement. Should the sale not be consummated,
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, 1995, the General Partners' share of Net Cash Receipts
totaled approximately $4,040,000, of which $3,410,000 is subordinated.
The General Partners intend to retain on behalf of the Partnership cash
reserves deemed adequate to meet working capital requirements as they may
arise.
In 1995 the Financial Accounting Standards Board issued Statement SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of". SFAS No. 121 requires that long-lived assets and certain
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Partnership periodically reevaluates the carrying amounts of
its long-lived assets and the related depreciation and amortization periods as
discussed in the notes to the Partnership's Financial Statements, and the
Partnership believes that the adoption of SFAS No. 121 will not have a material
effect on its financial statements.
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.
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, 1995 December 31, 1994
Financial Tax Financial Tax
Statements Return Statements Return
Total assets $45,544,330 56,757,543 46,504,585 57,361,197
Partners' capital accounts:
General Partners $ 220,783 246,046 178,093 199,771
Limited Partners $44,451,350 55,641,300 45,340,046 56,174,980
Net income:
General Partners $ 42,690 46,276 39,099 42,438
Limited Partners $ 4,226,262 4,581,277 3,870,779 4,201,322
Per Limited Partnership
Interest $ 16.45 17.83 15.07 16.35
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.
