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 June 30, 1996
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
2355 Waukegan Road Suite A200
Bannockburn, Illinois 60077
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (847) 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 .
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Balance Sheets
June 30, 1996 and December 31, 1995
1996
(Unaudited) 1995
Assets
Cash and cash equivalents $ 664,199 3,595,948
Accounts receivable, net of allowance for doubtful
accounts of $12,079 at December 31, 1995 12,240 87,047
Other 7,487 92,649
683,926 3,775,644
Mini-warehouse facilities:
Land - 16,925,647
Buildings - 36,597,146
Furniture, fixtures, and equipment - 903,419
- 54,426,212
Less accumulated depreciation - 12,657,526
Mini-warehouse facilities, net of accumulated
depreciation 41,768,686
$ 683,926 45,544,330
Liabilities and Partners' Capital
Accounts payable $ 356,866 15,967
Due to affiliates 36,704 59,264
Accrued liabilities 10,698 361,829
Security deposits - 72,678
Deferred income - 362,459
Total liabilities 404,268 872,197
Partners' (deficit) Capital:
Limited Partners'(256,904 Limited Partnership
Interests issued and outstanding) (110,266) 44,451,350
General Partners' 389,924 220,783
279,658 44,672,133
$ 683,926 45,544,330
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 Six Months Ended June 30, 1996 and 1995
(Unaudited)
Three Months Six Months
1996 1995 1996 1995
Income:
Rental $ 1,242,247 2,204,179 3,404,243 4,317,709
Interest on short term
investments 234,084 37,738 270,462 70,137
1,476,331 2,241,917 3,674,705 4,387,846
Expenses:
Property operating 447,285 620,586 1,053,389 1,172,810
Depreciation and amortization 266,421 378,560 644,980 757,118
Property management fees 76,104 124,003 200,352 246,995
Incentive management fees 625,305 - 625,305 -
General and administrative 132,371 98,801 357,471 217,950
1,547,486 1,221,950 2,881,497 2,394,873
(71,155) 1,019,967 793,208 1,992,973
Gain on sale of mini-warehouse
facilities 23,068,686 - 23,068,686 -
Net income $22,997,531 1,019,967 23,861,894 1,992,973
Limited Partners' share of net
income ($88.62 and $3.93 per
Interest for the three months
ended June 30, 1996 and 1995,
respectively, and $91.95 and
$7.68 per Interest for the
six months ended June 30, 1996
and 1995, respectively) $22,767,556 1,009,767 23,623,275 1,973,043
General Partners' share of
net income 229,975 10,200 238,619 19,930
$22,997,531 1,019,967 23,861,894 1,992,973
Distributions to Limited Partners
($259.78 and $4.97 per Interest
for the three months ended
June 30, 1996 and 1995,
respectively, and $265.41 and
$9.63 for the six months ended
June 30, 1996 and 1995,
respectively) $66,738,521 1,276,813 68,184,891 2,473,993
Distribution to General Partners $ 69,478 - 69,478 -
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Statements of Cash Flows
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
1996 1995
Operating activities:
Net income $23,861,894 1,992,973
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 644,980 757,118
Gain on sale of mini-warehouse facilities (23,068,686) -
Net change in:
Net accounts receivable 74,807 4,463
Other assets 85,162 40,447
Accounts payable 78,399 (11,086)
Due to affiliates (22,560) (106,723)
Accrued liabilities (351,131) 118,786
Security deposits (72,678) (9,367)
Deferred income (362,459) 70,479
Net cash provided by operating
activities 867,728 2,857,090
Investing activities:
Proceeds from sale of mini-warehouse facilities 66,800,000 -
Closing costs paid on sale of mini-warehouse
facilities (2,270,755) -
Additions to mini-warehouse facilities (74,353) (138,606)
Net cash used in investing activities 64,454,892 (138,606)
Financing activities:
Distributions to Limited Partners (68,184,891) (2,473,993)
Distribution to General Partners (69,478) -
Net cash used in financing activities (68,254,369) (2,473,993)
Net change in cash and cash equivalents (2,931,749) 244,491
Cash and cash equivalents at beginning of period 3,595,948 3,242,344
Cash and cash equivalents at end of period $ 664,199 3,486,835
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 and six months ended June 30, 1996, and all such
adjustments are of a normal and recurring nature.
2) Sale of Mini-Warehouse Facilities
In May, 1996 the Partnership sold to an unaffiliated third party
all twenty four of its mini-warehouse facilities for a net cash sales
price of $66,800,000. From the proceeds of the sale, the Partnership
incurred closing costs of $2,534,255 including sales commissions of
$2,004,000 paid to affiliates of the General Partners. The basis in the
properties was $41,198,059, which is net of accumulated depreciation of
$13,302,506. The sale resulted in a gain for financial statement
purposes of $23,177,686.
3) Transactions With Affiliates
The Partnership had 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 six months ended June 30, 1996 are:
Paid Payable
Property management fees $ 241,728 $ -
Incentive management fees (A) 625,305 -
General and administrative expenses 200,079 36,704
Sales Commissions (B) 2,004,000 -
(A) 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. During June 1996, the
General Partners received $694,783; $625,305 as its incentive management
fee and $69,478 as its distributive share of Net Cash Receipts. From
the inception of the offering through June 30, 1996 the General
Partners' share of Net Cash Receipts totaled approximately $4,825,000 of
which $3,863,000 is subordinated.
(B) In accordance with the Partnership Agreement, the General Partners
received sales commissions in connection with the sale of the mini-
warehouse facilities.
<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. In May, 1996, the Partnership
sold all 24 of its 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 1995 for a more complete understanding of
the Partnership's financial position.
Operations
Summary of Operations
In May, 1996 the Partnership sold all of its mini-warehouse facilities to an
unaffiliated third party. This sale significantly impacted the net income of
the Partnership for 1996. Further discussion of the Partnership's operations is
summarized below.
1996 Compared to 1995
Due to the sale of the Partnership's mini-warehouse facilities, rental income,
property operating expenses, depreciation and amortization expense and property
management fees decreased for the quarter and six months ended June 30, 1996 as
compared to the same periods in 1995.
As a result of the investment of sale proceeds prior to distribution to
partners, interest income on short-term investments increased for the quarter
and six months ended June 30, 1996 as compared to the same periods in 1995.
The Partnership incurred legal and other professional fees and printing and
postage costs in connection with the tender offers during 1996. As a result
administrative expenses increased for the quarter and six months ended June 30,
1996 as compared to the same periods in 1995.
Incentive management fees of $625,305 were earned by the General Partners during
1996 in accordance with the Partnership Agreement. See Note 3 of Notes to
Financial Statemenst for further information.
Liquidity and Capital Resources
The cash or near cash position of the Partnership decreased by approximately
$2,931,000 from December 31, 1995 to June 30, 1996. The Partnership's cash flow
provided by operating activities in the first half of 1996 of $759,000 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. Investing activities consisted
primarily of net sale proceeds received totalling approximately $64,638,000 from
the sale of the Partnerships mini-warehouse facilities. Financing activities
included distributions to the Limited and General Partners of approximately
$68,254,000.
In May, 1996 the Partnership sold to an unaffiliated third party all of its
mini-warehouse facilities for a net cash sales price of $66,800,000. Sales
proceeds were used to pay closing costs, including sales commissions of
$2,004,000 paid to affiliates of the General Partners, totaling $2,534,255 of
which approximately $262,000 is payable as of June 30, 1996. The majority of
the proceeds, together with working capital reserves, were distributed to
Limited Partners in June 1996. The remainder has been retained by the
Partnership to cover any contingencies arising from future litigation involving
the Partnership. It is anticipated that in the absence of any such
contingencies arising, the reserves will be distributed to Limited Partners
within the next six months, and the Partnership will be terminated.
In May 1996, the Partnership paid $65,253,616 ($254.00 per Interest) to Limited
Partners. Of this amount, $680,796 ($2.65 per Interest) represents cash flow
from operations for the second quarter of 1996 prior to the sale of the mini-
warehouse facilities, and $64,572,820 ($251.35 per Interest) represents sale
proceeds and working capital reserves. Including the May distribution, Limited
Partners have received distributions of Net Cash Receipts of $154.23 and Net
Cash Proceeds of $252.73 totaling $406.96 per $250.00 Interest.
Pursuant to the Partnership Agreement, the General Partners are entitled to 10%
of Net Cash Receipts available for distribution, subject to certain
subordination levels. The Limited Partners received distributions equal to the
subordination level for 1996 (distributions paid in July and October 1995, and
January, April and June 1996). The General Partners received $694,783 in June,
1996 ($625,305 as its incentive management fee and $69,478 as its distributive
share of Net Cash Receipts). From the inception of the offering through June
30, 1996 the General Partners' share of Net Cash Receipts totaled approximately
$4,825,000 of which $3,863,000 is subordinated.
<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
six months ended June 30, 1996 is attached hereto.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter
ended June 30, 1996.
<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 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
August 12, 1996
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 664
<SECURITIES> 0
<RECEIVABLES> 12
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 684
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 684
<CURRENT-LIABILITIES> 404
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 280
<TOTAL-LIABILITY-AND-EQUITY> 684
<SALES> 0
<TOTAL-REVENUES> 3675
<CGS> 0
<TOTAL-COSTS> 1254
<OTHER-EXPENSES> 1183
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 23862
<INCOME-TAX> 0
<INCOME-CONTINUING> 23862
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23862
<EPS-PRIMARY> 91.95
<EPS-DILUTED> 91.95
</TABLE>
