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
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EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1995
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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
-------------------------------------------------------
(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.)
2355 Waukegan Rd., Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
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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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<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
BALANCE SHEETS
September 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
------------ ------------
Cash and cash equivalents $ 366,385 $ 639,493
Escrow deposits 193,060 105,883
Prepaid expenses 49,201
Deferred expenses, net of accumulated
amortization of $74,340 in 1995 and
$50,445 in 1994 84,960 108,855
------------ ------------
693,606 854,231
------------ ------------
Investment in real estate, at cost:
Land 940,021 940,021
Buildings and improvements 16,578,369 16,578,369
------------ ------------
17,518,390 17,518,390
Less accumulated depreciation 7,775,050 7,187,233
------------ ------------
Investment in real estate, net of
accumulated depreciation 9,743,340 10,331,157
------------ ------------
$10,436,946 $11,185,388
============ ============
LIABILITIES AND PARTNERS' (DEFICIT) CAPITAL
Loan payable - affiliate $ 1,093,822 $ 1,041,594
Accounts payable 14,479 17,887
Due to affiliates 99,029 118,273
Accrued liabilities, principally
real estate taxes 342,938 283,839
Security deposits 44,570 41,760
Mortgage note payable 9,546,644 9,606,251
------------ ------------
Total liabilities 11,141,482 11,109,604
Affiliate's participation in joint venture 23,046 24,869
Partners' (deficit) capital (996,146 Units
issued and outstanding) (727,582) 50,915
------------ ------------
$10,436,946 $11,185,388
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
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, 1995 and 1994
(Unaudited)
1995 1994
------------ ------------
Income:
Rental and service $ 2,073,754 $ 2,003,657
Interest on short-term investments 19,236 26,311
------------ ------------
Total income 2,092,990 2,029,968
------------ ------------
Expenses:
Interest on mortgage note payable 627,974 632,945
Interest on short-term loan
payable - affiliate 52,228 34,424
Depreciation 587,817 585,179
Amortization 23,895 23,895
Property operating 901,732 672,262
Real estate taxes 196,275 198,433
Property management fees 102,941 100,183
Incentive partnership management fees 16,809 50,430
Administrative 136,784 114,478
------------ ------------
Total expenses 2,646,455 2,412,229
------------ ------------
Loss before affiliate's participation
in joint venture (553,465) (382,261)
Affiliate's participation in loss
from joint venture 970 567
------------ ------------
Net loss $ (552,495) $ (381,694)
============ ============
Net loss allocated to General Partner $ (5,525) $ (3,817)
============ ============
Net loss allocated to Unitholders $ (546,970) $ (377,877)
============ ============
Net loss per Unit (996,146 issued
and outstanding) $ (0.55) $ (0.38)
============ ============
Distributions to General Partner $ 1,869 $ 5,604
============ ============
Distributions to Unitholders $ 224,133 $ 672,399
============ ============
Distributions per Unit $ 0.225 $ 0.675
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
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, 1995 and 1994
(Unaudited)
1995 1994
------------ ------------
Income:
Rental and service $ 694,178 $ 679,770
Interest on short-term investments 8,163 10,158
------------ ------------
Total income 702,341 689,928
------------ ------------
Expenses:
Interest on mortgage note payable 208,890 210,584
Interest on short-term
loan payable - affiliate 17,564 15,974
Depreciation 195,940 195,059
Amortization 7,965 7,965
Property operating 440,028 245,352
Real estate taxes 68,588 76,374
Property management fees 35,359 33,989
Incentive partnership management fees 5,603 16,810
Administrative 40,466 37,767
------------ ------------
Total expenses 1,020,403 839,874
------------ ------------
Loss before affiliate's participation
in joint venture (318,062) (149,946)
Affiliate's participation in loss
from joint venture 699 243
------------ ------------
Net loss $ (317,363) $ (149,703)
============ ============
Net loss allocated to General Partner $ (3,174) $ (1,497)
============ ============
Net loss allocated to Unitholders $ (314,189) $ (148,206)
============ ============
Net loss per Unit (996,146 issued
and outstanding) $ (0.32) $ (0.15)
============ ============
Distribution to General Partner $ 623 $ 1,868
============ ============
Distribution to Unitholders $ 74,711 $ 224,133
============ ============
Distribution per Unit $ 0.075 $ 0.225
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
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, 1995 and 1994
(Unaudited)
1995 1994
Operating activities: ------------ ------------
Net loss $ (552,495) $ (381,694)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Affiliate's participation in loss
from joint venture (970) (567)
Depreciation of property 587,817 585,179
Amortization of deferred expenses 23,895 23,895
Accrued interest expense due at
maturity - affiliate 52,228 34,424
Net change in:
Escrow deposits (87,177) (117,097)
Accounts and accrued interest
receivable (1,489)
Prepaid expenses (49,201) 6,784
Accounts payable (3,408) 12,378
Due to affiliates (19,244) 25,426
Accrued liabilities 59,099 66,179
Security deposits 2,810 (15,146)
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Net cash provided by operating activities 13,354 238,272
------------ ------------
Financing activities:
Distributions to Unitholders (224,133) (672,399)
Distributions to General Partner (1,869) (5,604)
Distributions to joint venture
partner - affiliate (853) (3,513)
Proceeds from loan payable - affiliate 687,580
Principal payments on mortgage note payable (59,607) (54,636)
------------ ------------
Net cash used in financing activities (286,462) (48,572)
------------ ------------
Net change in cash and cash equivalents (273,108) 189,700
Cash and cash equivalents at beginning
of period 639,493 1,050,766
------------ ------------
Cash and cash equivalents at end of period $ 366,385 $ 1,240,466
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
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, 1995, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1995 and 1994, the Partnership
incurred and paid interest expense on the mortgage note payable of $627,974 and
$632,945, 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, 1995 are:
Paid
-----------------------
Nine Months Quarter Payable
----------- --------- ----------
Incentive partnership management
fees $ 16,809 $5,603 $ 88,557
Reimbursement of expenses to
the General Partner, at cost 75,400 9,217 10,472
In conjunction with the May 1993 financing of Autumn Woods Apartments, the
monthly debt service payments due on the first mortgage loan were required to
be funded by advances from the General Partner through December 16, 1994, at
which time the General Partner loan became due. The General Partner loan is now
a demand loan and is expected to be repaid from the available cash flow from
operations of the property and/or property sale proceeds. As of September 30,
1995, this loan had a balance of $1,093,822. During October 1995, the
Partnership made a repayment of $100,000 on the General Partner loan. During
the nine months ended September 30, 1995 and 1994, the Partnership incurred
interest expense on this loan of $52,228 and $34,424, 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, 1995, this rate was
6.307%.
4. Subsequent Event:
In October 1995, the Partnership made a distribution of $74,711 ($.075 per
Unit) to the Unitholders for the third quarter of 1995.
<PAGE>
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 1994 for a more complete understanding of
the Partnership's financial position.
Operations
- ----------
The exterior of the Autumn Woods Apartments was painted during 1995 which was
the primary reason for the increase in the net loss during the nine months and
quarter ended September 30, 1995 as compared to the same periods in 1994.
Further discussion of the Partnership's operations is summarized below.
1995 Compared to 1994
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1995 and 1994 refer
to both the nine months and quarters ended September 30, 1995 and 1994.
Due to lower average cash balances, interest income on short-term investments
decreased during 1995 as compared to 1994.
The General Partner advanced funds as required by the Prospectus to pay the
monthly debt service payments due on the property's mortgage loan through
December 1994, which increased the balance of the loan payable - affiliate.
This increase, combined with higher average interest rates in 1995, resulted in
an increase in interest expense on the short-term loan payable - affiliate
during 1995 as compared to 1994.
Due to the 1995 expenditure for the exterior painting of the Autumn Woods
Apartments, property operating expenses increased during 1995 as compared to
1994.
Due to a decrease in the distribution level to Unitholders, incentive
partnership management fees payable to the General Partner decreased during
1995 as compared to 1994.
Higher accounting fees resulted in an increase in administrative expenses
during 1995 as compared to 1994.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased as of September 30, 1995 when
compared to December 31, 1994, due to the payment of distributions to
<PAGE>
Unitholders and the General Partner exceeding the cash flow generated by the
operation of the Autumn Woods Apartments.
During 1995 and 1994, Autumn Woods Apartments generated positive cash flow,
which the Partnership defines as an amount equal to the property's revenue
receipts less property related expenditures, which include debt service
payments. As of September 30, 1995, the occupancy rate of the property was
93%.
In conjunction with the May 1993 financing of Autumn Woods Apartments, the
monthly debt service payments due on the first mortgage loan were required by
the Prospectus to be funded by advances from the General Partner on a zero
coupon basis until December 1994 when the General Partner loan matured. The
General Partner loan is now a demand loan and is expected to be repaid from the
available cash flow from operations of the property and/or property sale
proceeds. Additionally, all debt service payments required under the first
mortgage loan, which matures in 1998, will now be paid from the cash flow of
the property. As of September 30, 1995, the loan payable to the General Partner
is $1,093,822, including accrued interest thereon. In October 1995, the
Partnership made a repayment of $100,000 on this loan.
In October 1995, the Partnership paid $74,711 ($.075 per Unit) of Net Cash
Receipts to the Unitholders representing the distribution for the third quarter
of 1995. The level of this distribution remained unchanged from the amount
distributed to Unitholders for the second quarter of 1995. Including the
October 1995 distribution, the Partnership has distributed $6.47 per Unit which
represents Cash Flow from operations. The General Partner presently expects
that cash flow from property operations will allow the Partnership to continue
making quarterly distributions to Unitholders. However, the level of future
distributions will be dependent on the repayment of the General Partner loan
and the cash flow generated by Autumn Woods Apartments.
Since the Preferred Distribution levels to Unitholders specified in the
Partnership Agreement were not attained in any year, the General Partner has
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.
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 CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 2
to the Registrant's Registration Statement on Form S-11 dated December 17, 1986
(Registration No. 33-7858) and Form of Confirmation regarding Depositary Units
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. 0-16712) are
incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1995 is attached hereto.
(b) Reports on Form 8-K: A Current Report on Form 8-K dated September 14,
1995, as amended by Form 8-K/A dated October 27, 1995, was filed reporting a
change in the Registrant's certifying public accountants.
<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 CURRENT INCOME FUND-87
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor CIF
Partners, the General Partner
By: /s/Brian Parker
-----------------------------
Brian Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor CIF Partners, the General
Partner
Date: November 13, 1995
----------------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 366
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<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 609
<PP&E> 17518
<DEPRECIATION> 7775
<TOTAL-ASSETS> 10437
<CURRENT-LIABILITIES> 1595
<BONDS> 9547
<COMMON> 0
0
0
<OTHER-SE> (728)
<TOTAL-LIABILITY-AND-EQUITY> 10437
<SALES> 0
<TOTAL-REVENUES> 2093
<CGS> 0
<TOTAL-COSTS> 1218
<OTHER-EXPENSES> 748
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 680
<INCOME-PRETAX> (552)
<INCOME-TAX> 0
<INCOME-CONTINUING> (552)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (552)
<EPS-PRIMARY> (.55)
<EPS-DILUTED> (.55)
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