SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-16712
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BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 36-3451878
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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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 CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, 1994 and December 31, 1993
(Unaudited)
ASSETS
1994 1993
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Cash and cash equivalents $ 1,240,466 $ 1,050,766
Escrow deposits 211,111 94,014
Accounts and accrued interest receivable 3,319 1,830
Prepaid expenses 6,784
Deferred expenses, net of accumulated
amortization of $42,480 in 1994
and $18,585 in 1993 116,820 140,715
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1,571,716 1,294,109
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Investment in real estate, at cost:
Land 940,021 940,021
Buildings and improvements 16,578,369 16,578,369
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17,518,390 17,518,390
Less accumulated depreciation 6,988,657 6,403,478
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Investment in real estate, net of
accumulated depreciation 10,529,733 11,114,912
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$ 12,101,449 $ 12,409,021
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LIABILITIES AND PARTNERS' CAPITAL
Loan payable - affiliate $ 1,357,780 $ 635,776
Accounts payable 29,136 16,758
Due to affiliates 141,295 115,869
Accrued liabilities, principally real
estate taxes 353,497 287,318
Security deposits 44,562 59,708
Mortgage note payable 9,625,269 9,679,905
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Total liabilities 11,551,539 10,795,334
Affiliate's participation in joint venture 25,593 29,673
Partners' capital (996,146 Units
issued and outstanding) 524,317 1,584,014
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$ 12,101,449 $ 12,409,021
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The accompanying notes are an integral part of the financial statements.
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Income:
Rental and service $ 2,003,657 $ 1,942,876
Interest on short-term investments 26,311 22,114
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Total income 2,029,968 1,964,990
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Expenses:
Interest on promissory note
payable - affiliate 356,633
Interest on mortgage note payable 632,945 308,888
Interest on short-term loan payable
- affiliate 34,424 2,142
Depreciation 585,179 580,281
Amortization 23,895 10,620
Property operating 672,262 661,595
Real estate taxes 198,433 232,028
Property management fees 100,183 97,150
Incentive partnership management fees 50,430 50,430
Administrative 114,478 97,289
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Total expenses 2,412,229 2,397,056
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Loss before affiliate's participation in
joint venture (382,261) (432,066)
Affiliate's participation in loss
(income) from joint venture 567 (142)
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Net loss $ (381,694) $ (432,208)
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Net loss allocated to General Partner $ (3,817) $ (4,322)
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Net loss allocated to Unitholders $ (377,877) $ (427,886)
============== ==============
Net loss per Unit (996,146 issued
and outstanding) $ (0.38) $ (0.43)
============== ==============
Distributions to General Partner $ 5,604 $ 5,604
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Distributions to Unitholders $ 672,399 $ 672,399
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Distributions per Unit $ 0.675 $ 0.675
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The accompanying notes are an integral part of the financial statements.
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Income:
Rental and service $ 679,770 $ 658,415
Interest on short-term investments 10,158 4,337
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Total income 689,928 662,752
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Expenses:
Interest on mortgage
note payable 210,584 212,136
Interest on short-term
loan payable - affiliate 15,974 1,875
Depreciation 195,059 193,427
Amortization 7,965 8,440
Property operating 245,352 269,937
Real estate taxes 76,374 75,221
Property management fees 33,989 32,927
Incentive partnership management fees 16,810 16,810
Administrative 37,767 21,533
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Total expenses 839,874 832,306
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Loss before affiliate's participation in
joint venture (149,946) (169,554)
Affiliate's participation in loss
from joint venture 243 362
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Net loss $ (149,703) $ (169,192)
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Net loss allocated to General Partner $ (1,497) $ (1,692)
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Net loss allocated to Unitholders $ (148,206) $ (167,500)
============== ==============
Net loss per Unit (996,146 issued
and outstanding) $ (0.15) $ (0.17)
============== ==============
Distribution to General Partner $ 1,868 $ 1,868
============== ==============
Distribution to Unitholders $ 224,133 $ 224,133
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Distribution per Unit $ 0.225 $ 0.225
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The accompanying notes are an integral part of the financial statements.
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Operating activities:
Net loss $ (381,694) $ (432,208)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Affiliate's participation in (loss)
income from joint venture (567) 142
Depreciation of property 585,179 580,281
Amortization of deferred expenses 23,895 10,620
Accrued interest expense due at
maturity - affiliate 34,424 358,775
Net change in:
Escrow deposits (117,097) (166,181)
Accounts and accrued interest
receivable (1,489) 1,339
Prepaid expenses 6,784 6,784
Accounts payable 12,378 2,169
Due to affiliates 25,426 3,879
Accrued liabilities 66,179 81,585
Security deposits (15,146) 9,486
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Net cash provided by operating activities 238,272 456,671
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Investing activity:
Additions to property (45,839)
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Net cash used in investing activity (45,839)
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Financing activities:
Distributions to Unitholders (672,399) (672,399)
Distributions to General Partner (5,604) (5,604)
Distributions to joint venture partner -
affiliate (3,513) (3,278)
Proceeds from loan payable - affiliate 687,580 401,969
Proceeds from issuance of mortgage
note payable 9,720,000
Prepayment of promissory note payable -
affiliate (9,790,420)
Principal payments on mortgage note
payable (54,636) (22,662)
Payment of deferred expenses (159,300)
Funding of improvement reserve (200,850)
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Net cash used in financing activities (48,572) (732,544)
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Net change in cash and cash equivalents 189,700 (321,712)
Cash and cash equivalents at beginning
of period 1,050,766 1,165,984
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Cash and cash equivalents at end of period $ 1,240,466 $ 844,272
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The accompanying notes are an integral part of the financial statements.
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
A reclassification has been made to the previously reported 1993 statements in
order to provide comparability with the 1994 statements. In the opinion of
management, all adjustments necessary for a fair presentation have been made to
the accompanying statements for the nine months and quarter ended September 30,
1994, and all such adjustments are of a normal and recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1994 and 1993, the Partnership
incurred and paid interest expense on the mortgage note payable of $632,945 and
$308,888, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1994 are:
Paid
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Nine Months Quarter Payable
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Property management fees $99,471 $34,400 $11,001
Incentive partnership
management fees 50,430 16,810 99,764
Reimbursement of expenses to
the General Partner, at cost:
Accounting 24,015 15,325 12,403
Data processing 6,079 2,266 5,121
Investor communications 7,465 4,764 3,451
Legal 2,330 1,487 2,278
Portfolio management 7,020 4,480 4,891
Other 6,537 4,172 2,386
In May 1993, the Partnership used proceeds from the financing of the mortgage
loan collateralized by Autumn Woods Apartments and a General Partner loan to
prepay the zero coupon loan and accrued interest thereon. For the nine months
ended September 30, 1993, the Partnership incurred interest expense of $356,633
in connection with the zero coupon loan, all of which was paid in May 1993.
In conjunction with the May 1993 financing of the loan collateralized by Autumn
Woods Apartments, the monthly debt service payments due on the first mortgage
loan are required to be funded by advances from the General Partner through
December 16, 1994, at which time the General Partner loan becomes due. As of
September 30, 1994, this loan had a balance of $1,357,780, including accrued
interest of $39,037. During the nine months ended September 30, 1994 and 1993,
the Partnership incurred interest expense on this loan of $34,424 and $2,142,
respectively. Interest expense was computed at the American Express Company
cost of funds rate plus a spread to cover administrative costs. As of September
30, 1994, this rate was 5.362%.
4. Subsequent Event:
In October 1994, the Partnership made a distribution of $224,133 ($.225 per
Unit) to the holders of Limited Partnership Depositary Units for the third
quarter of 1994.
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Current Income Fund-87 A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1986 to invest in and operate
income-producing real property. The Partnership raised $14,942,190 from sales
of Limited Partnership Depositary Units and utilized these proceeds to acquire
Autumn Woods Apartments. The Partnership continues to operate this property.
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 1993 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Net Loss
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Improved operations at Autumn Woods Apartments due primarily to rental rate
increases resulted in a decrease in the net loss during the nine months and
quarter ended September 30, 1994, as compared to the same periods in 1993.
Further discussion of the Partnership's operations is summarized below.
1994 Compared to 1993
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Rental rates increased at Autumn Woods Apartments, resulting in an increase in
rental and service income during the nine months and quarter ended September
30, 1994 as compared to the same periods in 1993.
Due to higher interest rates on short-term interest-bearing instruments,
interest income on short-term investments increased during the nine months and
quarter ended September 30, 1994 as compared to the same periods in 1993.
Balcor Real Estate Holdings, Inc. ("BREHI"), an affiliate of the General
Partner, previously funded a zero coupon loan to the Partnership on which
interest expense compounded semi-annually. During May 1993, this loan was
prepaid with proceeds received from the financing of the mortgage loan
collateralized by Autumn Woods Apartments and funds advanced from the General
Partner. This resulted in the cessation of interest expense on the promissory
note payable - affiliate.
The financing of the mortgage loan collateralized by Autumn Woods Apartments
resulted in an increase in interest expense on the mortgage note payable and
amortization of deferred expenses during the nine months ended September 30,
1994 as compared to the same period in 1993.
The General Partner advanced funds to prepay the remainder of the zero coupon
loan in May 1993, and has continued to advance funds to pay the monthly debt
service payments due on the property's mortgage loan. As a result, interest
expense on the short-term loan payable - affiliate increased during the nine
months and quarter ended September 30, 1994 as compared to the same periods in
1993.
During 1994, the Partnership received a refund of prior years' taxes from
taxing authorities due to a decrease in the tax assessment of Autumn Woods
Apartments. This resulted in a decrease in real estate tax expense during the
nine months ended September 30, 1994 as compared to the same period in 1993.
Primarily due to higher accounting, portfolio management and data processing
costs, administrative expenses increased for the nine months and quarter ended
September 30, 1994 as compared to the same periods in 1993.
Liquidity and Capital Resources
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The Partnership's cash flow provided by operating activities during the nine
months ended September 30, 1994 was generated primarily from cash flow from the
operation of Autumn Woods Apartments, which was partially offset by the payment
of administrative expenses and incentive partnership management fees. Financing
activities included the payment of distributions to Unitholders and the
partners, the receipt of loan proceeds from the General Partner to fund debt
service payments on the Autumn Woods mortgage loan, and the payment of
principal on the mortgage note payable. The cash or near cash position of the
Partnership at September 30, 1994 increased in comparison to December 31, 1993.
The Partnership's cash or near cash position fluctuates during each quarter,
initially decreasing with the payment of Partnership distributions for the
previous quarter, and then gradually increasing each month as property
operating income is received.
In conjunction with the May 1993 financing of the loan collateralized by Autumn
Woods Apartments, the monthly debt service payments due on the first mortgage
loan are required to be funded by advances from the General Partner on a zero
coupon basis until December 1994 when the General Partner loan matures. At that
time, the outstanding balance of the General Partner loan will be approximately
$1,520,000, including accrued interest thereon. Subsequently, all debt service
payments required under the first mortgage loan will be paid from the cash flow
of the property. As of September 30, 1994, the loan payable to the General
Partner is $1,357,780, including accrued interest thereon. See Note 3 of Notes
to Financial Statements for additional information.
In October 1994, the Partnership paid $224,133 ($.225 per Unit) of Net Cash
Receipts to the holders of Limited Partnership Depositary Units representing
the distribution for the third quarter of 1994. The level of this distribution
remained unchanged from the amount distributed to Unitholders for the second
quarter of 1994. The General Partner presently expects that cash flow from
property operations will allow the Partnership to continue making quarterly
distributions to Unitholders. However, as described above, due to the maturity
and expected repayment of the General Partner loan beginning in December 1994
and the subsequent payment of debt service on the first mortgage loan from
property cash flow, the level of distributions subsequent to that date will
decrease. The General Partner loan is expected to be repaid from available cash
reserves, and any shortfall in repaying the General Partner loan will be paid
from operations in future years.
Since the Preferred Distribution levels to Unitholders specified in the
Partnership Agreement were not attained in any year, the General Partner
subordinated 25% of its share of Net Cash Receipts in accordance with the
Partnership Agreement. The General Partner anticipates that future distribution
levels will continue to result in further subordinations of its incentive
management fee and distributive share from operations.
On November 4, 1994, The Balcor Company completed the sale of the assets of
Allegiance Realty Group, Inc. to an unaffiliated company, Insignia Allegiance
Management, Inc. ("Insignia"), which is based in Greenville, South Carolina. As
a result of this transaction, Insignia has assumed the management of the
Partnership's properties. This transaction is not expected to result in any
material change to the property management fees paid by the Partnership.
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.
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 CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Thomas E. Meador
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor CIF
Partners, the General Partner
By: /s/Allan Wood
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Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer (Principal
Accounting and Financial Officer) of Balcor
CIF Partners, the General Partner
Date: November 17, 1994
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