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, 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 60015
(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
September 30, 1996 and December 31, 1995
1996
(Unaudited) 1995
Assets
Cash and cash equivalents $ 329,210 3,595,948
Accounts receivable, net of allowance for doubtful
accounts of $12,079 at December 31, 1995 - 87,047
Other 1,312 92,649
330,522 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
$ 330,522 45,544,330
Liabilities and Partners' Capital
Accounts payable $ - 15,967
Due to affiliates 36,747 59,264
Accrued liabilities 23,368 361,829
Security deposits - 72,678
Deferred income - 362,459
Total liabilities 60,115 872,197
Partners' (deficit) capital:
Limited Partners'(256,904 Limited Partnership
Interests issued and outstanding) (119,424) 44,451,350
General Partners' 389,831 220,783
270,407 44,672,133
$ 330,552 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 Nine Months Ended September 30, 1996 and 1995
(Unaudited)
Three Months Nine Months
1996 1995 1996 1995
Income:
Rental $ 9,009 2,267,978 3,413,252 6,585,687
Interest on short term
investments 5,403 38,142 275,865 108,279
Other 18,795 - 18 795 -
33,207 2,306,120 3,707,912 6,693,966
Expenses:
Property operating 10,682 581,010 1,064,071 1,753,820
Depreciation and amortization - 378,558 644,980 1,135,676
Property management fees - 125,889 200,352 372,884
Incentive management fees - - 625,305 -
General and administrative 31,776 101,076 389,247 319,026
42,458 1,186,533 2,923,955 3,581,406
(9,251) 1,119,587 783,957 3,112,560
Gain on sale of mini-warehouse
facilities - - 23,068,686 -
Net (loss) income $ (9,251) 1,119,587 23,852,643 3,112,560
Limited Partners' share of net
(loss) income ($(0.03) and
$4.31 per Interest for the
three months ended
September 30, 1996 and 1995,
respectively, and $91.92 and
$11.99 per Interest for the
nine months ended
September 30, 1996 and 1995,
respectively) $ (9,158) 1,108,391 23,614,117 3,081,434
General Partners' share of
net (loss) income (93) 11,196 238,526 31,126
$ (9,251) 1,119,587 23,852,643 3,112,560
Distributions to Limited
Partners ($4.97 per Interest
for the three months ended
September 30,1995 and $265.41
and $14.60 for the nine months
ended September 30, 1996 and
1995, respectively) $ - 1,276,813 68,184,891 3,750,798
Distribution to
General Partners $ - - 68,478 -
See accompanying notes to financial statements.
<PAGE>
Balcor/Colonial Storage Income Fund - 86
(An Illinois Limited Partnership)
Statements of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
1996 1995
Operating activities:
Net income $23,852,643 3,112,560
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 644,980 1,135,676
Gain on sale of mini-warehouse facilities (23,068,686) -
Net change in:
Net accounts receivable 87,047 (4,076)
Other assets 91,337 (7,109)
Accounts payable (15,967) (11,086)
Due to affiliates (22,517) (95,036)
Accrued liabilities (338,461) 212,175
Security deposits (72,678) (15,019)
Deferred income (362,459) 53,029
Net cash provided by operating
activities 795,239 4,381,114
Investing activities:
Proceeds from sale of mini-warehouse facilities 66,800,000 -
Closing costs paid on sale of
mini-warehouse facilities (2,533,255) -
Additions to mini-warehouse facilities (74,353) (186,219)
Net cash provided by (used in)
investing activities 64,192,392 (186,219)
Financing activities:
Distributions to Limited Partners (68,184,891) (3,750,798)
Distribution to General Partners (69,478) -
Net cash used in financing activities (68,254,369) (3,750,798)
Net change in cash and cash equivalents (3,266,738) 444,097
Cash and cash equivalents at beginning of period 3,595,948 3,242,344
Cash and cash equivalents at end of period $ 329,210 3,686,441
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 nine months ended September 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 $2,533,255 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 $23,068,686.
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 nine months ended September 30, 1996 are:
Paid Payable
Property management fees $ 241,728 $ -
Incentive management fees (A) 625,305 -
General and administrative expenses 204,857 36,747
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 September 30, 1996 the General
Partners' share of Net Cash Receipts totaled approximately $4,825,000 of
which $3,863,000 was not paid.
(B) In accordance with the Partnership Agreement, affiliates of the
General Partners received sales commissions in connection with the
sale of the mini-warehouse facilities.
4) Subsequent Event
In May, 1996 the Partnership sold all twenty-four of its mini-warehouse
facilities. In October, 1996, the Partnership distributed $144,404
($0.56 per Interest) to Limited Partners representing the final
distribution of proceeds remaining from the sale. On October 31, 1996,
the Partnership was dissolved and the Partnership's registration under
Secuities and Exchange Act of 1934 was terminated.
<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 nine months ended September 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 nine
months ended September 30, 1996 as compared to the same period in 1995, and
decreased for the quarter ended September 30, 1996 as compared to the same
period in 1995 due to the June, 1996 distribution to Partners of sales proceeds.
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 nine months ended September 30, 1996
as compared to the same period in 1995. Administrative expenses decreased for
the quarter ended September 30, 1996 as compared to the same period in 1995 due
to reduced administrative requirements after the sale of the Partnership's
mini-warehouse facilities in May, 1996.
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 Statements for further information.
Liquidity and Capital Resources
The cash position of the Partnership decreased by approximately $3,267,000 from
December 31, 1995 to September 30, 1996. The Partnership's cash flow provided
by operating activities of $776,000 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 totaling
approximately $64,267,000 from the sale of the Partnership's 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 $2,533,255.
The majority of the proceeds, together with working capital reserves, were
distributed to Limited Partners in June 1996.
In October 1996, the Partnership paid $144,404 ($0.56 per Interest) to Limited
Partners. This distribution represents the final distribution of sales
proceeds. Including the October distribution, Limited Partners received
distributions of Net Cash Receipts of $154.23 and Net Cash Proceeds of $253.29
totaling $407.52 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
September 30, 1996 the General Partners' share of Net Cash Receipts totaled
approximately $4,825,000 of which $3,863,000 was subordinated.
On October 31, 1996, the Partnership was dissolved and Partnership's
registration under the Securities and Exchange Act of 1934 was terminated.
<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, 1996 is attached hereto.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter
ended September 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/ Jayne Kosik
Jayne Kosik,
Chief Accounting and Financial Officer
(Principal Accounting 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
November 12, 1996
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 329
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 331
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 331
<CURRENT-LIABILITIES> 60
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 271
<TOTAL-LIABILITY-AND-EQUITY> 331
<SALES> 0
<TOTAL-REVENUES> 3708
<CGS> 0
<TOTAL-COSTS> 1264
<OTHER-EXPENSES> 1659
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 23852
<INCOME-TAX> 0
<INCOME-CONTINUING> 23852
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23852
<EPS-PRIMARY> 91.92
<EPS-DILUTED> 91.92
</TABLE>
